Smart Saving and Investing

Did you date your spouse when you were young?

Are you in your twenties, in a relationship and thinking about marriage?

Do you think you’ll save and invest by the time you’re 50 as you and your partner create a life together?

Have you made plans to do this? What are your financial plans for 10, 20, 30, 40, or 50 years of marriage?

Maybe you don’t have financial plans but you just know by the time your 50 years old you’ll both have saved so much money, contributed so much to your retirement plan and started other types of investment plans that you’ll be financially okay.

The Story

In the past month I’ve seen three couples I know, in or around 50 year olds and have been together for 25-30 years, who argue about the money they don’t have.

One spouse commenting to me that, “If things don’t change soon, I’ll have to do something.” What does that mean? The way it was told to me, it means resentment. It sounded like possible separation and even divorce.

It means not being part of the relationship that made sure they were saving and investing over the past 25-30 years so it wouldn’t get to this point. No financial plans except hoping for the best.

Disagreements for 25-30 years on where the money should be spent. “We’ll have money like our parents do and have acquired.” Well, these couples are parents of teenagers, college-aged, and working adult kids.

Some attributes these couples shared over their 25-30 years of marriage:

• young
• in love
• always together
• struggling
• in debt
• graduating from college
• new jobs
• employer retirement account
• marriage
• in debt
• kids
• new house
• cars
• vacations
• in debt
• Christmas gifts no one would forget
• up-to-date clothes for the family - no matter what
• paid weddings for their kid(s) by way of second mortgage or any other bad debt vehicle - “Don’t worry, you’ll have a great wedding - no matter what”
• taking care of friends and family in diverse financial ways - buying them something to help them out, etc.
• paying for their adult kids who are married now - their utilities, housing, cars, etc.
• giving to charities
• tithing
• in debt

This kind of story repeats for so many couples and generations it’s kind of crazy to watch and hear about. It’s like a collective, unspoken agreement that this is the way it is.

So what will happen to some of these couples? I don’t know. The love is almost lost with some of them, but not gone. It can be saved, fixed and corrected. It will take work and understanding.

The Future

Young folks can visualize what the future looks like but if you don’t take actions and implement those actions in such a way that covers your financial future long term, you’ll end up carrying out some of the same scenarios that have happened for years, over and over again to many people.

What financial goals do you want to hit and how are you going to get there? What alternative plans can you put into place so you hit them.

How about the plans on how you’re going to feel about your spouse when you don’t hit those financial goals. Are you going to blame them? Ban them for your life as to say, “It’s your fault”?

How do both of you feel about the attributes above? Can you agree on how they should happen? When? How much? Do they have to happen?

Financial problems between couples is one of the most debilitating attributes that cause divorce and destruction in families. Treat it as if a train is coming down the track and your best friend or family member is standing on the tracks. What would you do? You’d do everything you could to get that person off the tracks.

written by Bill Stevens

When you’re first child is born there is an overwhelming feeling of taking care of that child in every way possible. At some point you start thinking, “I better get it together. I better start saving for my child’s college education. I know, I’ll check into one of those 529 Plans available through out the country.”

I’d like to present another way for you to look at your child’s college education.

First, you shouldn’t even think about how you’re going to pay for your child’s college education if you haven’t done the three actions that I describe at this site for yourself and your spouse.

Forget about any college savings plan like the 529 Plan. Instead, open up your own account at a brokerage firm that you name, “Jane’s Post High School Savings Plan” or something similar to that.

This plan would have the same time horizon that you’d need for your child’s college education. So if you’ve taken care of your own savings and retirement plans, and you now have a new baby named Jane, then open up an account and set a time horizon of 18 years when you’ll need the money for your child’s education or possibly something else.

Which leads me to - you don’t owe your child a college education. There are many ways to pay for college but only one way to pay for your retirement. What you owe your children is equality of opportunity.

This means if one child wants to go to college then you’ll have money saved for them to help them make it through college. If you have another child that wants to open their own business, then you are set to help them with the money you’ve saved for their post high school endeavors.

You might have a child who doesn’t know what they want to do so they immediately go into the work force. You are then in a position to hold on to the money under your name and your spouse’s name (because that’s how you opened the account in the beginning) to be used by you or continue to hold for the child. They might want to go to college a few years later.

On another note, I would be extremely skeptical of giving a big chunk of money to any 18 year old to manage. You never know what path your child will take. Read this.

As I’ve mentioned in other posts, your money is your money, don’t let someone else or some other program try to manage it better than you can. We can always manage our money better than someone else or some program. The only “someone else” we’d work with is a financial advisor who is interested in how best to manage our money and not sell us some kind of investment gimmick. This would be someone we’d pay for their advice and not what would make them the most money - annuities, a bridge in Florida, etc.

To help calculate what you’ll need to invest in for your child’s post high school endeavors, check out this calculator that helps you answer the question, “What should I invest in for this account?”

The calculator is CNNMoney.com Asset Allocator. Play with the different settings and you’ll wind up with the asset classes you’ll want to invest in. As time moves forward and your child nears those college years, recalculate how to reallocate the money you’ve invested into less volatile asset classes like bonds and cash.

Here are some screen shots of starting with a new account. The choices listed are what I would do. But keep in mind that I put myself in a more aggressive investing category.

Here are the results:

Again, I would recalculate now what different asset allocations look like as the child nears 18 years of age. That would give you a plan today that you could stick to for that time horizon. Assuming the CNNMoney.com Asset Allocator is still around in 10 years and maybe the financial world looks different, you can always go to their website and recalculate what you’ll need to do.

Let’s jump ahead and see what the pie chart looks like when the child is 15 years of age.

Here are the results:

In Part 2 of this series I’ll present the portfolios you can invest in.

written by Bill Stevens

Do you have a plan? Do you have a financial plan? Do you have financial goals? Do you have any goals?

What do you want to be worth when you’re 30 years old, 40 years old, 50 years old, etc.?

What do you want to be doing with the rest of your life or at different stages of your life and how are you going to do that?

Do you want to be like Timothy Ferriss of “The 4-Hour Workweek”, where you take mini-retirements. Sounds good to me. I suppose a bit tough to do for a lot of folks but he is definitely on the right track.

I highly recommend you read his book The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich for some new ways to think about retirement, work life and thoughts on how to design your own life.

It’s important to ask these questions and try to answer them in some form, because not only are you looking into the future to try and sculpt or shape it, but it also creates a bit more stability in your mind as well as open the possibilities you might not have thought about.

I know some folks don’t like to perform repetitive tasks in life because they always want to do something different so they don’t get bored with life or complacent. However, if you’re married or have a family where other people financially count on you, then you might want to plan some of your financial future by setting goals.

We’ll take the first action that I talk about on this blog, open an online savings account. Sounds simple for some, on the other hand it might be difficult for others.

After you’ve accomplished that goal, you might set other goals for the account. Let’s say you’ve decided to save enough for that proverbial 3-6 months of emergency funds and that would make you feel good and secure about any hardships that come about during everyday life.

Well, write down the target amount. Let’s say you would like to save $5,000.00 before you stop automatic deposits to that account. So do some simple math and let’s say you deposit $100.00 a month through automatic deposits for four years.

You’d be contributing $1,200.00 a year for four years and you’d have $4,800.00 in your online savings account. Plunk $200.00 more in there for the final month or $100.00 for an additional two months and that would give you your $5,000.00, 3-6 month emergency funds that would then grow at around 5% which would give you $250.00 a year that your money would make for you.

Now, I know that sounds wonderful and that sometimes emergencies happen right when you’re in the middle of your savings plan or for some folks all the time, but this is something that you forge ahead with until you hit that magical number that you’ve set for yourself.

I would start thinking about your tax refund, if you usually get one, and NOT planning on using it at all except for your online savings account or funding your Roth IRA account.

Stop thinking about your tax refund as if it’s some kind of gift or Christmas present from the government. It’s you’re hard earned money that you lent the government instead of making money on it yourself. Just say NO to that type of thinking!!

“A journey of a thousand leagues begins with a single step” - Confucius

written by Bill Stevens