Category Archives: budget

E*TRADE Seminar #1: Essential Steps for Planning a Secure Retirement

Yay! Today has finally arrived! It’s Retirement Education Day 2014!!! E*TRADE is hosting several web-based seminars throughout today and is discussing retirement related topics. I will be participating in all of them. And I am very excited.

Yes, I actually took a day off of work to do this.

And yes, I am that nerdy.

I’m sure all of the seminars will be very energetic and information filled. I will summarize the key points of each seminar and provide my thoughts on the material.

On to the first one! The first seminar is “Essential Steps for Planning a Secure Retirement.” It focused on 4 key steps.

  • Organize Your Financial Priorities
  • Take Ownership of Your Retirement
  • Calculate an Estimate of Your Retirement Outlook
  • Create & Execute Your Plan

Organize Your Financial Priorities

Jumping right into it, the presenter mentions paying off higher interest debt and building a liquid emergency fund (of 3-6 months of expenses) prior to starting a retirement savings.

Then, find out if your company has a retirement savings plan and if they match contributions. You definitely want to take advantage of this free money. Consider either a traditional IRA or Roth IRA for additional retirement savings options.

After you’ve started saving for retirement, you would then focus on funding education for your kids, paying off lower interest debt, and then paying off your mortgage.

Take Ownership of Your Retirement

After you’ve prioritized your financial plan, take ownership of your retirement. In this case, ownership means to get your hands around your retirement and take control of it.

The key action step here is to document your retirement goals. Some questions to consider are: When do you want to retire? What kind of lifestyle do you want in retirement? What is your risk tolerance level?

In addition to documenting your goals, of course, you want to document what you currently have in retirement savings as well as the rest of your financial assets.

Calculate an Estimate of Your Retirement Outlook

This is a straightforward step. Once you’ve prioritized your finances and established your goals, run calculations to see if your current plan is on track (or off target) for you to hit your retirement goals.

E*TRADE recommends its own Retirement Planning Calculator tool (of course!) to analyze how well you are doing.

Create & Execute Your Plan

Once you’ve run your calculations, you’ll find that you expect to have a shortfall or a surplus.

If you have a shortfall, you should consider changing some of your spending habits now, so that you can reach your retirement goals. The alternative, of course, is to reduce your standard of living during retirement.

Some other things to do include: increase your tax-deferred savings to retirement or consider delaying your retirement for a few years. You could also reevaluate your portfolio allocation, take on a little more risk, and (hopefully) get a better rate of return.

If you expect to have a surplus, then congratulations! But don’t get complacent. Continue to save and even increase your savings as necessary. You may even consider reducing your risk. You’ll get lower returns, but you may also sleep better at night.

Generally, you need to consider your health care expenses during retirement. And you need to be sure to have a solid estate plan in place. This may involve a will or trust (among other things), depending on your needs. If you have retirement savings accounts, always designate a beneficiary on these!

My Thoughts About This Seminar

This seminar was the first one and effectively was a 30-minute presentation to highlight and to setup the rest of the day.

Overall, the material was pretty good. Of course, there are some obvious things that I agree with: yes, you need to set financial goals and you need to prioritize them; yes, it’s good to understand where you stand with your finances; and yes, you should take action to make sure that you hit your goals.

There was really only one thing that I don’t personally agree with.

I am debt free (except for my mortgage), and I suggest you pay off all of your debt (again, except for a mortgage) prior to saving for retirement. I advocate paying off all your debt because you gain financial freedom. Saving lower interest debt for later (after investments) makes mathematical sense, but you are not financial free!

That said, is either strategy right or wrong? Well, no, no, no. If you have a plan in place, stick with it, and are intentional about implementing it, then either strategy will work out fine.

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Budgeting Issues = My Lack of Motivation for Blogging

I don’t remember where I was. Maybe, it was in Chicago during one of my training sessions. Perhaps, I was in Memphis during the territory-wide engineering meeting for my company. Or maybe, I was sitting around at home or at the office…

Wherever it was, I remember looking at my budget for February and feeling extremely discouraged!

I’d been budgeting for 15 months. A real budget. For 15 months. Sure, the first couple of months were rocky. But, I finally got into the swing of things, and my budget was pretty much on cruise control. I went strong for about a year.

Then, February 2014 rolled around. I set up my usual budget, figuring it would be another cruise control month.

But it wasn’t.

It was not one or two (or three) big money items. It was all of the little nickel and dime expenses that I didn’t expect or account for. All of a sudden, my budget was in disarray…

And I was mad at myself. I was frustrated at my budget. I felt like I was losing control of a budget that was cruising along.

And I just started up this blog. I lost my motivation to blog. Sure, it’s new, and I probably don’t have any readers out there… (Hello?!) But it’s newness didn’t discourage me. I wasn’t quite sure why I couldn’t write anymore.

More About My Budget

My budget is wacky, always have been and always will be. But I got complacent. I set the cruise control and didn’t expect to eventually run into a car… or a tree. Okay, I am being too nice: I WAS BEING LAZY!!! And stupid. And I was lying to myself.

I do things like giving myself flexibility in my budget to shift things around and living off of last month’s income.

I do these things because they worked (and they still do). But I blindly assumed that they would always work without my careful watch.

February started as a bad month. My income was down (new year, higher medical premiums, more taxes, etc.), and I budgeted like I had my usual income.

When I realized that I was grossly over-budget, I started to pull money out of certain budget categories and made rash adjustments without thinking about what expenses I could reasonably expect for the month.

Then, things happened. My budget changed. And changed again. And again. It felt like I was making small little adjustments every day. And I got fed up.

After a few weeks of reflecting, I realized two important things.

Numero Uno

I started this blog to talk about finances. The unspoken goal was to write about the good and the bad. Not just the good.

Taking care of my finances is critically important. And I have a blast when I am succeeding. But I need to realize that there will be lows in this roller coaster ride.

My goal is to share all of these experiences.

Numero Dos

For my personal budget, I need to be more careful. In fact, March may also not be a good month. I pre-categorized my budget in March (back in February), and my income never caught up to all of the money in those categories.

So, I started to back down from different categories. But this time, I more wisely pulled money from categories after considering them carefully.

The better thing to do, starting in April for me, is to watch for income to come in first. Then, place that money into the appropriate places. That way, I will be forced into thinking about my priorities.

End of Whining Session

Follow-Up On My February 2014 Budget

So, I’ve been gone for a few weeks. I will follow-up on why soon.

But before I do that, I wanted to follow-up about my budget for February 2014. It was a wacky month with a bunch of changes during the month.

Keep in mind one of my budgeting philosophies: “Even though this is what I have budgeted for February at the start of the month, I give myself the flexibility to move money from one budget category to another. What is budgeted at the end February is likely to be different.”

And different it was…

My Actual Income for February 2014 (Earned in January 2014)

I made two adjustments. One because I screwed up. I had an additional $204.58 in my HSA account that I simply missed.

The second adjustment was made because we sold some of our kids’ clothes in February. The wife and I wanted to go ahead and use that money for clothes in February. Since this is money coming in, I count it as income.

Income Source Description Amount
His Income #1 The breadwinner. Accounts for more than 75% of our household income. $2,284.09
His Income #2 My side hustle(s). Currently, just tutoring (didn’t earn any money in January). Hopefully, more side hustles to come! $0.00
Her Income #1 The wife doesn’t have a full-time job. This is from her wedding planning part-time job. $485.00
Her Income #2 She also watches two kids in the morning and afternoon. $275.00
ESPP Income Actually, in a convoluted way, comes from my primary income. I sell my ESPP stocks for more than $9,000 every 6 months. I “pay” myself $1,500 every month. $1,500.00
Other Income Interest, dividends, contributions to our HSA, all other income. $388.82 $656.02
Total Income Money, money, money…!!! $4,932.91 $5,200.11

My (Revised) Budgeted Expenses for February 2014

From the income listed above, this is how I have budgeted for my expenses.

Category Description Budgeted Percentage
Charity Really, just our tithes for now. Seems disproportionate to our take-home income but is 10% of our gross. $800.00 $652.97 16.2% 12.6%
Child Care Day care (mostly; day care is expensive!), baby/toddler supplies (small portion of budget). $865.46 $1,250.00 17.5% 24.0%
Food Groceries, restaurants. $431.67 $455.82 8.8%
Gifts Birthdays, Christmas, etc. (Umm, Valentine’s Day… oops, forgot about this!) $0.00 0.0%
Health & Fitness Medicines, prescriptions, office visits, gym memberships. $352.91 $788.92 7.2% 15.2%
Housing Mortgage, insurance, pest control, maintenance, repairs. $1,231.86 $1,214.03 25.0% 23.3%
Miscellaneous Ah, the miscellaneous bucket. Includes allowance for the kids and “his and hers” spending cash. $46.50 $34.53 0.9% 0.7%
Personal Clothing, hair care, financial planning, life insurance, taxes, organizational dues. $132.46 $91.34 2.7% 1.8%
Recreation General entertainment, birthday parties, kid’s activities, vacation. $46.31 $0.00 0.9% 0.0%
Savings College, emergency fund, retirement… above and beyond automatic deposits into the dedicated (separate) checking account. $0.00 0.0%
Transportation Insurance, gasoline, license, registration, maintenance, repairs, car replacement. $698.23 $412.72 14.2% 7.9%
Utilities Cell phone, electricity, TV, Internet, water, sewer. $327.51 $299.78 6.6% 5.8%
Total Expenses  The whole shebang… $4,932.91 $5,200.11 100.0%

What Happened?

Primarily, our Health Savings Account had all sorts of system issues, and I didn’t have debit card access to the account. So, I ended up charging our February medical/prescription expenses to our day-to-day checking account.

I could reimburse my checking account from the HSA, but I think it’s too much hassle to keep up with a ton of paperwork for a few hundred dollars. Our budget took a beating, but we can handle it financially, so that’s that…

Secondly, we’re enrolling our daughter into Pre-K and registrations fees were due in February. Sadly, I neglected to account for this at the beginning of the month. Again, a few adjustments to the budget fixed this problem.

Some Final Notes

As I mentioned in my previous post, I run a zero-based budget, which means two things:

  1. If I made a mistake and “discover” money during the month, I need to put it into the budget. I account (as a budgeted expense) for every last dollar and cent that is considered income.
  2. Sometimes, what I estimate at the beginning of the month is different than where it ends up at the end of the month. Yes, I still make mistakes. Ultimately though, I remain flexible and give myself the room to make changes.

If you make a mistake or a few, make the necessary adjustments and don’t dwell on it! Happy budgeting!

My February 2014 Budget

A budget is the cornerstone of personal finance. To be able to pay off debt… or to save… or to have money to have fun with… you need a budget! For years I thought that a budget would be a very restrictive thing. But using a budget has given me control over my finances.

I absolutely recommend that you create, use, and stick to a budget!

Some Notes About My Budgeting System

Here are some quick notes about the budget I show below.

  1. I live on last month’s income. This prevents me from living paycheck-to-paycheck. The income I listed below was actually earned in January, but I didn’t budget it until now, in February.
  2. I run a zero-based budget. This means that I budget every dollar and every cent into some category. No money is left over (budget wise, not checking account wise).
  3. I have several payroll deductions from my primary income. Expenses like medical premium, vision premium, and group life insurance are not included in the table below. Also, my 401(k) savings is automatically deducted from my paycheck and not shown below.
  4. We use two joint checking accounts and one Health Savings Account. One checking account is strictly for savings (retirement, emergency fund, and college). This checking account holds money temporarily until it distributed to other savings account. After deductions, roughly half of my paycheck is directed into this checking account.
  5. A small portion of my primary paycheck goes into the Health Savings Account.
  6. The remaining portion of my primary paycheck goes into the second checking account, which is used for our day-to-day spending and bills. All of our other income also goes into the day-to-day checking account.
  7. The budget below breaks out my household’s day-to-day checking account and Health Savings Account, while keeping the, umm, “savings” checking account out of sight, out of mind.
  8. Lastly and most importantly: Even though this is what I have budgeted for February at the start of the month, I give myself the flexibility to move money from one budget category to another. What is budgeted at the end February is likely to be different.

My Actual Income for February 2014 (Earned in January 2014)

Let’s first take a look at my household income. I live on last month’s income, so this is actual money already earned (well, most of it is earned).

Income Source Description Amount
His Income #1 The breadwinner. Accounts for more than 75% of our household income. $2,284.09
His Income #2 My side hustle(s). Currently, just tutoring (didn’t earn any money in January). Hopefully, more side hustles to come! $0.00
Her Income #1 The wife doesn’t have a full-time job. This is from her wedding planning part-time job. $485.00
Her Income #2 She also watches two kids in the morning and afternoon. $275.00
ESPP Income Actually, in a convoluted way, comes from my primary income. I sell my ESPP stocks for more than $9,000 every 6 months. I “pay” myself $1,500 every month. $1,500.00
Other Income Interest, dividends, “free” company contributions to HSA. $388.82
Total Income Money, money, money…!!! $4,932.91

Again, this is what comes into our Health Saving Account and primary checking account.

My Budgeted Expenses for February 2014

From the income listed above, this is how I have budgeted for my expenses.

Category Description Budgeted Percentage
Charity Really, just our tithes for now. Seems disproportionate to our take-home income but is 10% of our gross. $800.00 16.2%
Child Care Day care (mostly; day care is expensive!), baby/toddler supplies (small portion of budget). $865.46 17.5%
Food Groceries, restaurants. $431.67 8.8%
Gifts Birthdays, Christmas, etc. (Umm, Valentine’s Day… oops, forgot about this!) $0.00 0.0%
Health & Fitness Medicines, prescriptions, office visits, gym memberships. $352.91 7.2%
Housing Mortgage, insurance, pest control, maintenance, repairs. $1,231.86 25.0%
Miscellaneous Ah, the miscellaneous bucket. Includes allowance for the kids and “his and hers” spending cash. $46.50 0.9%
Personal Clothing, hair care, financial planning, life insurance, taxes, organizational dues. $132.46 2.7%
Recreation General entertainment, birthday parties, kid’s activities, vacation. $46.31 0.9%
Savings College, emergency fund, retirement… above and beyond automatic deposits into the dedicated (separate) checking account. $0.00 0.0%
Transportation Insurance, gasoline, license, registration, maintenance, repairs, car replacement. $698.23 14.2%
Utilities Cell phone, electricity, TV, Internet, water, sewer. $327.51 6.6%
Total Expenses  The whole shebang… $4,932.91 100.0%

Some Final Notes

I am debt free (other than my mortgage) and have been for several months. I also have 6 months of expenses in an emergency fund. Currently, I am saving for retirement and for my kid’s college.