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3 Signs of Financial Anxiety
NewsFebruary 16, 2022
Financial anxiety is a feeling of worry, fear, or unease about your finances. Learn to read your body’s responses to conversations about money, and set regular money check-ins to keep financial anxiety under control.
Are you experiencing too much strain when it comes to your finances? The Covid-19 pandemic has made it hard for people to seek answers about their financial futures, and many financial planners are underestimating the financial anxiety that is causing.
Financial anxiety happens when you have money, a job and all the hallmarks of financial security, but still worry that something bad is going to happen. For many people, the constant weight of that anxiety could be worse than a negative event that could be happening. Here are three signs of Financial Anxiety and how Agemy Financial Strategies can help you get back on track to finding answers to your financial futures.
1. You’re Just Scraping By
The Covid-19 Pandemic left more people living paycheck to paycheck. It’s understandable to be anxious if you’re not sure whether you’ll be able to pay your bills. Or, maybe you’re not even sure if you’ll be able to buy groceries for the week. If you’re in a financial state that requires you to depend on every penny from every paycheck, you’re bound to experience anxiety.
The biggest problem with this type of anxiety is that it might continue to grow as you near the end of your budget every pay period. That keeps you in a constant cycle of anxiety, which can wreak havoc on your system. The best thing you can do to combat financial stress is to get your finances in order. You could see a financial planner, set a budget, or work out a savings plan with your bank.
Financial planners can help ease their clients’ financial anxieties by including a questionnaire on the topic in their client intake process and by undergoing training to help them better identify and manage these situations as they come up. At the end of the day Financial planners are there to help you get back on track and by answering the questionnaires truthfully they’ll be able to get a better understanding of your financial situation.
2. You Overspend
It might seem counterintuitive, but a lot of people actually spend more money when they’re under heavy financial stress. It can help to ease their worries for a while. When you buy something new that you enjoy, you can temporarily push aside feelings of anxiety. As you might expect, though, those “good” feelings don’t last long. The more you spend, the more your financial woes will grow. And those fears will continue to grow along with them.
Keeping your spending habits in check is one of the best things you can do to combat the anxiety caused by financial stress. To get started, look at your bank statement for the last month. Note down all of your income streams and group them together. Then, split your expenses into two categories: fixed and variable costs. Fixed costs include expenditures that are difficult to change such as your rent, utility bills, and any debt repayments. Your variable costs include your payments that are easier to adapt such as money spent on groceries, subscriptions services, and clothing. From here you’ll be able to see:
3. You Have Strained Relationships
We hear it all the time…one of the main causes of divorce is money. It’s not necessarily the money itself that causes it but the behaviors around money that create tension in relationships. This tension can cause too much strain over time and result in divorce. Therefore, it’s best to be able to recognize signs ahead of time that you or your spouse may be under financial stress.
No matter how close the couple is or how long the relationship has spanned, no couple see EXACT eye to eye when it comes to finances. For example, one spouse could have had a childhood of watching their parents overspend or worrying about bills, or having to shut down a family business. Whereas the other spouse could have had a much more stable and privileged upbringing – alas causing them to see money management differently. The answer? Communication. Creating a household money “practice,” or getting into the habit of regularly checking in with your finances as a couple, is the simplest way to shape a relationship with your money, and your partner.
Here are some further recommendations on how to help ease the anxiety.
Identify Areas Where You Can Save
If your outgoing expenses exceed your income, don’t worry. You can either decrease your spending in certain areas or, if possible, focus on bringing in some extra income each month. You can even decide to do both, but it’s important not to overwhelm yourself when creating better financial habits—especially at the beginning.
Once you’ve identified areas where you’re overspending, you’ll have a clear indicator of where you should start cutting back. Beyond that, the easiest place to begin reducing your expenditures is your variable costs. However, if you want to make some more drastic savings, you can consider targeting your fixed costs. This means, for example, finding ways to save on rent or utility bills.
Create A Budget
Next, it’s time to decide how much money you want to save each month and to create a budget to support that goal. As you begin to make changes that free up some extra money, you’ll get an idea of how much you can start to put towards a savings fund.
Adopting a savings mentality can take a little while to get used to, but it’s all about taking small, consistent steps towards your goal. One of the best tools against financial anxiety is having a solid budget helps you navigate your finances and keeps your financial health in check. From here, you can start making some smarter, forward-thinking financial decisions.
This could include saving for an emergency fund or contributing towards your pension. By creating a buffer between you and life’s surprises, you prevent your future self from spiraling into financial stress—you’ll certainly thank yourself for it later!
Explore Your Mental Health
Think: What is my anxiety trying to tell me?
A body check-in teaches people how to step to the side and be able to observe and witness more of what’s going on so we’re not so consumed with it. Start paying attention to your emotions and how your body reacts when you discuss money or make financial decisions. How do you feel when you check account balances online? What about when you share information about your latest investments with a loved one? Identifying financial anxiety triggers will help you consider what is in the conversation that is triggering these feelings. Is it how you communicate with your partner? Are you feeling guilty or ashamed?
Take a step back and work on observing emotions rather than working off of them.
Schedule Regular Money Check-ins with Agemy Financial Strategies
One of the keys to a sound financial strategy is spending less than you take in, and then finding a way to put your excess to work. A money management approach involves creating budgets to understand and make decisions about where your money is going. It also involves knowing where you may be able to put your excess cash to work.
A Fiduciary is a person or organization that acts on behalf of a person or persons and is legally bound to act solely in their best interests. As Fiduciaries, the advisors at Agemy Financial Strategies only have your best intentions at heart.
Scheduling time with us (or your chosen advisor) to address finances and help you focus on immediate actions to see where you are overspending – or where to invest your money. Start by sharing money stories with us, how you’re feeling and then move on to discussing values and how they show up in the way you save, spend or invest. The goal of these conversations is to help you understand your feelings about money — an important step toward getting on the same page and easing financial anxiety for yourself, and for your family.
Final Thoughts
Money Management and Financial Anxiety go hand in hand when managing different aspects of your personal finances. At Agemy Financial Strategies, our job is to help ease those feelings of financial anxiety and help you improve your money management skills by regularly evaluating your current money management plan and making necessary changes that make sense for you.
When you create a roadmap of where you want to go, there will be changes along the way. At Agemy Financial Strategies, our team of financial advisors are here to help you through those changes and to help you understand the ins and outs of money management.
For more information on our financial advisory services, contact us here today.
Bringing Meaning to Money Management
NewsFebruary 08, 2022
Generally speaking, money management refers to the processes of budgeting, saving, investing, spending, or otherwise overseeing the capital usage of an individual or group. But we’re all wired differently, and therefore mastering your finances looks different for everyone. Here’s how to create a money management plan that has structure and meaning to your unique needs and goals.
Money management covers a broad domain of knowledge including everything relating to handling money wisely. Whether it’s budgeting, saving or investing in your personal assets. To embrace money management means to learn financial practices that help you accumulate wealth and security, while understanding the key to preserving that wealth.
Implementing the management of your money takes your unique needs, goals, and risks into consideration while focusing on your financial decision making and your previous habits that could stand in the way of your success. Here’s a look at the basics of money management and why it’s important to start implementing these practices into your financial strategy.
The Basics of Money Management
Not understanding the foundation of money can create some issues for you down the road. Without a firm, educated grasp of financial matters, you’ll likely end up like the majority of Americans; locked into years of debt, paying high fees, and unsure where all of your money is going.
Money management can help people accumulate wealth instead of potentially spending all of their money. When you accumulate wealth, you will be able to increase your capital, create security for your family, make positive investments, better your standard of living, and develop a cushion in the form of assets and savings. Overall, money management increases your lifestyle, providing security and greater opportunity for you and your family. Take a look at a couple steps below to see how you can begin to implement money management into your life.
The bottom line in money management is that you need to know where you’re headed. Without a clear destination, you’re more than likely going to keep going around in circles. That’s exactly what it’s like to be dealing with money without goals. However, if you establish your financial goals, you have a roadmap of where you’re at and where you want to end up financially. You’ll be prepared to intentionally use or save every dollar that comes your way.
By setting your goals, you’ll also be able to set some smaller goals that act as steps along the way. These small goals are basically milestones that help you to progress further down the path to your financial destination. Your goals will give you clarity and vision, helping you make the best decisions for reaching them.
Having a long-term investment strategy is often the key to strong and effective money management and wealth accumulation. When you create a long-term strategy, you’re more likely to keep your eyes on the prize and not be swayed by the many things that come your way.
An investment strategy helps people stay focused, moving towards their small milestones instead of veering off in every which way. They are better able to ignore the stepping stones that others are putting in their path in order to keep on heading in the right direction towards their own goals.
Understanding your taxes is a big part of money management. While everyone knows that they pay taxes, they’re not really aware of how much they pay. They certainly don’t know about unnecessary taxes and how they can actually hinder the accumulation of wealth. When you are managing your money, you aren’t thinking of your income as everything you make. Instead, you know that your income is really whatever you make after taxes, enabling you to better allocate your finances.
In regards to investments, you will want to consider your account location, essentially allocating your money based on their tax status. You will then do the same for your various investments, allocating them in the same manner. This will give you a better understanding of your overall wealth, your options for wealth distribution, and will help you accumulate wealth faster.
In the financial world, risk management is the process of identification, analysis, and acceptance or mitigation of uncertainty in investment decisions. Poor management of risk is one of the main causes of investment underperformance. You need to be proactive when it comes to risk management, understanding the risk-return relationship and acting on it.
How much volatility an investor should accept depends entirely on the individual investor’s tolerance for risk, or in the case of an investment professional, how much tolerance their investment objectives allow.
When you have a seamless money management plan, you will understand the market risks and the likelihood of negative returns. You will be cognizant of the fact that holding your portfolio longer means more negative returns, yet also means a greater probability of a positive annual return.
Final Thoughts
From managing different aspects of your personal finances, to developing a coherent plan that maximizes financial growth while minimizing risk, money management is not to be taken lightly.
You can improve your money management skills by regularly evaluating your current money management plan and making necessary changes that make sense for you. When you create a roadmap of where you want to go, there will be changes along the way. At Agemy Financial Strategies, our team of financial advisors are here to help you through those changes and to help you understand the ins and outs of money management.
For more information on our financial advisory services, contact us here today.
Retirement Planning for Couples this Valentine’s Day
NewsFebruary 02, 2022
With Valentine’s Day around the corner, what better time to sit down with your sweetheart to discuss all of your aspirations and goals for when you reach retirement? To help protect your lifestyle in retirement — and protect against the risk of outliving your savings — you and your partner can develop a holistic financial plan for every stage of your financial life.
While it might not seem the most romantic of ways to spend the day, this Valentine’s Day is the perfect opportunity to evaluate your retirement plans to help you reach the dreams of a lifetime together. Here are some tips on how to discuss retirement planning for young couples, middle-aged couples and couples nearing retirement.
Young Couples: It’s Never Too Early To Start Planning
If you and your partner are at the start of your careers and life together, your financial concerns might focus on balancing immediate matters, such as buying your first home and starting your family, and paying down debt from student loans. Most Millennials are concerned with keeping up with the cost of living as well as the cost of meeting their children’s financial needs. Student loans, credit card debt and mortgage debt round out the top five.
Saving for the future should not take a back seat to your current expenses. Time is on your side if you use the power of tax-deferred compounding. Make an effort to start early and maximize your contributions on your 401(k)s and traditional IRAs. If both of you are working, be sure that you work together to save for retirement.
Compare the funds in your employers’ qualified plans and work as a team to select the best investments for your shared goals, instead of making these choices on your own. If one partner is not working outside the home, a spousal IRA may allow you to make contributions on their behalf. If one or both of you qualify for a Health Savings Account (HSA), this can be a way to save for future medical expenses while reducing your current taxable income.
Middle-Aged Couples: Protect Assets to Protect Against Outliving Savings
By now, you have had several years of planning and setting money aside for retirement. Both of your careers are on track, you’re earning more, you’ve built equity in your home, you’re saving to send your kids to college.
To continue on the right path, have you considered using dollar-cost averaging to build wealth over time? Dollar-cost averaging requires the investor to invest the same amount of money in the same stock on a regular basis over time, regardless of the share price. The number of shares purchased each month will vary depending on the share price of the investment at the time of the purchase. The idea being when the share value rises, your money will buy fewer shares per dollar invested. When the share price is down, your money will get you more shares. Over time, the average cost per share you spend should compare quite favorably with the price you would have paid if you had tried to time it.
As you both progress towards your retirement years, concerns about protecting your assets may rise. Especially as volatility starts to feel like the new norm. Roughly two-thirds of pre-retirees expect volatility to increase in the next 12 months!
It’s always important to meet with your Fiduciary financial advisor to work on a strategy that’s built for you and your unique needs and goals as a couple. As your portfolio becomes more conservative, including more fixed income, you might consider asset location as a strategy to enhance your returns.
Couples Nearing Retirement: Income Now and for Life
At this point, you and your partner should already have a strategy to maximize your qualified accounts such as Social Security. It helps you maximize benefits as a couple if the higher-earning spouse waits until full retirement age, or later, to begin collecting.
In many cases, this means the lower-earning spouse can start collecting benefits as early as age 62, then apply for spousal benefits later when the higher-earning spouse begins collecting. With smart planning, a couple can secure higher benefits the longer the high earner waits — and this could also mean higher survivor’s benefits for the spouse who lives longest.
To complement Social Security, you could convert a portion of your portfolio into a guaranteed income stream by investing in a single premium immediate annuity (SPIA). This is also the time to consider “turning on” the income stream from any annuity you have available to you.
Another vital aspect for when you’re nearing retirement is factoring in healthcare. If you retire before age 65, you have several options for health insurance until you reach eligibility for Medicare. Which options you are eligible for and are best for you depend on your individual circumstances. You may enroll in the state health insurance marketplace, continue your employment-related benefits through COBRA or state continuation, enroll in your spouse’s health plan, or apply for Medicaid. The Affordable Care Act (ACA) has made health insurance coverage when retiring before age 65 a much less challenging situation. This is especially true for people with medical conditions or limited finances—both of which could be obstacles for early retirees seeking coverage in the pre-ACA era.
If you’re unsure where to begin, it’s always best to consult with a trusted financial advisor.
For ALL Ages: Communication is Key
The first step in creating a retirement plan is communication.
Couples who work through later-in-life decisions with respect and care for each other have a solid retirement communication plan. They will find that their golden years can often be happier because they know themselves better and can find peace together. With the increased likelihood that couples will reach and surpass their 50th wedding anniversary, keeping marriage harmonious by resolving conflict with a team approach will yield great contentment and increased satisfaction in companionship.
Undoubtedly, there will be difficult conversations and compromises that need to be made on your journey. Couples planning for retirement may experience many challenges as listed above. Open honest communication can transform your relationship as you enter the next phase of your lives. Each of you should discuss your expectations as a married couple for retirement to ensure that both of you are on on the same page. Once you have both communicated about your retirement expectations, it’s time to move onto the financial aspects of retirement with your Fiduciary.
Final Thoughts
Retirement planning for couples involves navigating the waters together and it could, possibly, be the most challenging period of your relationship. This Valentine’s Day, don’t just dream about a lifetime with the one you love. Make the initiative to be proactive and work together as a team with your partner and your advisor to ensure that you are financially prepared for the future.
At Agemy Financial Strategies, finding the right financial advisor that fits your goals and lifestyle doesn’t have to be hard. The trusted team at Agemy is here for you every step of the way to make some real progress on your journey to retirement.
Contact us here today to get started on a retirement plan as a couple.
Taking Groundhog Day Out of Retirement Planning
NewsJanuary 26, 2022
Is your retirement plan stuck in a time-loop? The better you plan for retirement, the more likely you’ll be to enjoy your senior years to the fullest. That’s why it’s imperative that you don’t repeat any of these glaring mistakes when it comes to your retirement outlook.
If you wake up every morning thinking that you need to get your retirement plan updated, or worse, started, you might feel like Bill Murray in the classic movie “Groundhog Day.” Truth be told, a lot of days in 2021 felt like Groundhog Day: a never-ending time loop of new variants, working from home, eating at home, exercising at home, visiting with friends and family in small groups, etc. But did you know there’s a way to get out of an retirement plan time loop, and it won’t require you to go through endless mornings with a clock radio playing The Beatles’ “Tax Man” song?
A common mistake that people make when planning for retirement is that they focus on their present financial situation or the few years that lie ahead. They don’t look beyond the horizon of retirement. By making these mistakes they fall into the mindset of “I’ll get to it later” or creating a highly flawed plan.
Money is important, but time is of the essence. A lot of time has been lost due to the pandemic, and the need for getting back on track must be acknowledged. The sooner you can start your quest for retiring at your preferred age, the better. Here’s a couple tips on how to not fall victim to this mindset and how to constantly evaluate and update your retirement plan for years to come.
Having No Plan in Place
Too often there are retirees who don’t have their goals and needs laid out. The importance of having these goals and needs in place for when retirement approaches is crucial. Many people forget to update those goals and needs as they change. It’s the people who establish a good plan early on who have the most success.
You shouldn’t wait until your next life stage begins because there is always another life stage inviting you to postpone taking action until tomorrow (more on this below). If people wait to postpone saving and investing until their forties, they may have to save at double the annual rate of people who start investing in their twenties.
As a general rule of thumb, if you save 10–12% of your salary between the ages of 22 and 65, you will have roughly the same ability to cover retirement expenses as an individual who saves 25 percent between 40 and 65. Establishing good habits early pays off. Make a plan and stick to it.
The Imperfect Plan
The second kind of mistake happens when people have a plan but it’s flawed. You think you’re looking ahead but you’re not looking clearly or far enough. Here are the most common investment mistakes we see and the most important ones you should avoid:
To combat these imperfections in your plan, try the following:
Revsiting Your Retirement Plan with Agemy Financial Strategies
There’s a tendency to see your retirement plan as a static document — a map that you follow throughout your working life leading you toward the finish line. Even if you presume your retirement plan is up to date, do you really know if that plan still works for you? Will it truly create a lifestyle that will stir your soul in the next chapter? You have to update it periodically to ensure that it’s still in alignment with your shifting goals, savings, and priorities. Here are six times you should review it and consider updates with your trusted Fiduciary at Agemy:
Do you fall into any of the above categories? If so, Agemy Financial Strategies is here for you every step of the way to ensure you create healthy retirement planning habits for years to come.
The Bottom Line
Everyone should have a retirement plan. Nobody wants to keep working into their golden years and nobody wants to struggle with financial hardship during that period of time in your life. The sooner you put a plan in place, the higher your chances of succeeding.
If your retirement plan is stuck in Groundhog Day, call our office at 800.725.7616 and make an appointment to meet with us by phone, video conferencing or in the offices in both Guilford, CT and Denver, CO. We can get your current plan updated, and get you out of the time loop. Eventually, Bill Murray got to tomorrow in “Groundhog Day, and the same can happen for your retirement years.
For more information on money management and retirement planning, talk to one of our financial advisors here today.
Helping Adult Children Without Sabotaging Your Retirement
NewsJanuary 19, 2022
If you have an older child or children, there’s probably a question on your mind: How can I help them financially without going broke myself? As your adult children face financial challenges, your first thought may be to help them out. But this may not be the best plan of attack for setting them – or you – up for a secure financial future.
A large portion of the millennial generation are finding it extremely tough to pay their rent and utility bills, afford groceries and car payments. This leaves parents wanting to help their struggling adult children make ends meet. For baby boomers in or near retirement, this is a big consideration as providing financial support to a family member can affect their own retirement plans. How can you help them without breaking your bank?
Tables Are Turning
As the elderly population grows and a new crop of young adults are financially struggling to attain a solid financial foothold in trying economic times, individuals ‘sandwiched’ between aging parents and adult children are adequately referred to as ‘the sandwich generation’. Over the past decade, studies on sandwich generation caregivers have become more popular, with the Pew Research Center and National Caregiving Alliance (NCA) performing regular surveys on caregiving habits. Several striking statistics show what makes this hard-working group unique:
Some adults spend years as a sandwich generation caregiver, while others experience only a brief overlap. However, a new (and worrying) generational shift is happening: According to a recent study, 1 in 3 parents say they have delayed or are willing to delay their retirement to help pay for their children’s college education.
Modern Day Money Management
Parents need to learn to set expectations and limits … for their children and for themselves.
While financially caring for an adult child, it’s important to work together to find a solution. Teach children the concept of earning, budgeting and investing as early as possible. This may be done by giving them an allowance when they are younger or encouraging them to get a job when they are older. Teach them the important financial lesson of appropriately managing the money they earn, and consider allowing them to make small-scale mistakes along the way to help them learn.
If debt is an ongoing issue, you may want to get professional advice on debt management and payment strategies. Having too much credit card debt is not a good way to start off life. It can ruin your credit and force you to pay higher interest rates on new debt, which can cripple you financially. Instilling good financial habits in your children can set a positive foundation for their relationship with money in adulthood — and lessen the odds of them having to rely on “The Bank of Mom and Dad” as they grow up.
Figure Out How Much Help You Can Realistically Afford to Offer
You may need to have a candid talk about what you can and can’t do. Communicate with your children how much financial support you plan to give them, if any, during their adulthood. It’s a simple task but you’d be surprised at how many parents don’t prioritize their own finances.
There are many ways to go about helping your adult child without opening your checkbook. For example, you could offer to watch your child’s kids to reduce her daycare costs, or pick them up from school so it’s one less thing for them to stress about. If you’re not in a position to help your adult child right now, have an open talk with them about it.
Be honest and explain that there are certain things you as a parent are willing to do for your kids and certain things you won’t. Don’t be afraid to say “no” if you’re not in a position to help your grown kids financially.
Consider a Loan Instead of a Gift
It’s important to specify whether your financial help to your adult child is a loan or a gift.
If you decide on a loan, begin by writing a contract with a set timeline. How long it will take to be paid back and how frequent the payments will be. The payments can start out small and later increase, as your adult children find their footing. They write you a check every month, no matter how small it is, so there is some feeling of gratitude and payback. You should never feel guilty about making your child pay you back. This is a great way to hold them accountable which in turn would help them become more accountable later in life.
Get Professional Help
Giving your adult children money may help them in the short-term but may not give them the skills and tools they need to be financially successful. If providing financial assistance to your adult children is a priority for you, incorporate it into your own financial planning process. Sit down with your children and help them create a budget they can stick to. Look at what money is coming in every month and what is going out. See what can be completely cut out or reduced in the expenses column. If they are outspending what they make, devise a budget that is going to work within their parameters.
You won’t be doing your kids any good, though, if you give them so much financial assistance that doing so depletes your savings. Through your years of financial experience, you may have crossed paths with many financial professionals. Whether they were an acquaintance or you hired them to help you with your finances, you may know plenty of financial professionals that could help your children move toward a successful financial future.
A financial advisor or Fiduciary can help you plan for your and your children’s future, and develop a secure financial plan which includes debt repayment, saving for college, and developing a retirement investment strategy. They help you see the big financial picture and assist you in making financial decisions that align with your goals. The sooner your children begin to work with a financial advisor or planner, the sooner they can start achieving their financial objectives.
Final Thoughts
As a parent, it’s natural to want to help your children financially, but be careful not to do it at the expense of securing your own retirement. Above all, make sure you discuss your spending needs both as a family and with your financial advisor. You’ve put time and effort into building a sustainable retirement plan. Don’t derail your hard work by giving away more than you can afford.
Do you need assistance managing your retirement expectations with your loved ones? The trusted Fiduciaries at Agemy Financial Strategies are here for you every step of the way.
For more information on money management and planning, talk to one of our financial advisors here today.
Prepare for a Financial Emergency with These 4 Tips
NewsJanuary 04, 2022
The thought of being hit with a major negative event that could affect your finances, such as a job loss, an illness, or a pandemic, can keep anyone awake at night. Emergencies won’t wait until you’re financially ready, so prepare for them now.
Noone likes or wants them – but life emergencies happen. In these stressful times, having access to personal financial, insurance, medical and other records is crucial for starting the recovery process quickly and efficiently.
The best time to prepare for a financial emergency is by preparing well in advance. If you wait until something unfortunate happens, you could find yourself scrambling to be able to find the needed funds. Here are 4 tips to help you prepare for a financial emergency.
Create A Budget
This is by far the most overlooked part in financial planning. While budgeting can be tedious, you’ll have a picture of your income and expenses and you’ll be better equipped to build a bigger savings cushion. To get started, you’ll need to track your expenses. Use an online budgeting tool or app that links to your bank, investment, credit card and other accounts and automatically tracks and categorizes expenses.
A simple budget breakdown follows the 50-20-30 rule: Up to 50% of your take-home pay is for essential expenses, such as rent or mortgage payments, utility bills, transportation to work, groceries, and insurance premiums; at least 20% goes toward saving for retirement, an emergency fund and other goals, and paying down debt; and up to 30% is designated for nonessentials, which may include restaurant meals and travel and entertainment spending.
Our free online financial calculators are a great first step. Financial calculators are a helpful tool to assist you in managing your money and estimating your loan payments. All you need is some information about your finances and these specialized online math machines will spit out the numbers or percents you need to manage your finances and make budgeting decisions. Try out our fast, easy and free online resources here.
Have More Rainy Day Funds in Place
Without savings, a financial shock—even minor—could set you back, and if it turns into debt, it can potentially have a lasting impact.
Setting up a dedicated savings or emergency fund is one essential way to protect yourself, and it’s one of the first steps you can take to start saving. Instead of maintaining one fund for large, unexpected expenses, why not create two? Your true emergency fund is meant for catastrophes that may result in a total loss of income, such as divorce, job loss, or medical or mental disability that keeps you out of work. Set aside “rainy day” funds for urgent but less-catastrophic needs, such as car and home repairs, medical and vet bills, and short-notice travel to be with an ill relative.
How much should you put in each? For the rainy-day fund, financial advisors recommend setting aside about $1,500 for young, single renters and between $3,000 and $5,000 for homeowners, depending on how much upkeep your home needs. Your secondary emergency fund, you should have enough to cover at least six months of expenses. If starting small, try to set aside at least $500, but work your way up to half a year’s worth of expenses.
Paying Down Debt
Now that you have your rainy day fund set aside, you can start paying down some of your debt. People often find that a lot of their budget goes to paying off debt, which can make it even harder to devote money to emergency savings. There are a number of different options for paying off debt that may make sense for your situation.
Whether your current debt is your car payment or a credit card bill, it’s always a good idea to pay a little more than the minimum. You’ll save the most by paying off debts in order of highest to lowest interest rate. But eliminating the debt with the smallest balance first—even if it doesn’t carry the highest rate—may give you the momentum you need to stick with the plan.
If you feel overwhelmed by debt or your efforts to pay off debt are not making progress, a money management plan could be a helpful tool to lower your interest, save money and pay off debt faster.
Re-Allocate Your Assets
Financial advisors suggest young people who have time to withstand market changes should invest their nest egg in stocks and people closer to retirement age should ramp up their holdings in bonds and cash. This offers lower potential returns than stocks – but less volatility.
The asset allocation that’s right for you depends on your capacity and tolerance for risk. The former gauges how a downturn might impact your lifestyle or derail your goals. The latter is how much of a loss you could stand before you abandon your plan. Rebalance your holdings periodically to make sure they’re in line with your target mix.
Furthermore, you may already have some amount of assets that could be channelized to your emergency fund. It could be extra cash lying around in your savings accounts, some fixed deposits that are not linked to any particular goal, among others. You can allocate some of that amount towards your emergency fund.
Final Thoughts
When the unexpected happens, it’s downright debilitating to your long-term financial health. A financial emergency plan is an exceptionally valuable tool for an unexpected situation that often happens in life.
Finding the right Fiduciary that fits your goals and lifestyle doesn’t have to be hard. The trusted team at Agemy Financial Strategies is here for your every step of the way to make some real progress on your journey to financial freedom this coming year.
For more information on money management and financial emergency planning, talk to one of our financial advisors here today.