We want to thank everyone who submitted questions! The response to our questions Facebook post was so good that we were compelled to respond through a blog. We hope you find the question / answer blog informative. Please comment if you do and we will be sure to do more of these in the future.
- How much should I be spending on the different budget items? (How much should I be spending on going out to eat?)
- This is where it all depends on your overall goal. There are a lot of “rule of thumb” percentages out there of 50 housing/30 wants/20 saving, and they aren’t a bad place to start, but I feel they could be tweaked as well. What we would recommend is:
- Giving – 10%
- Saving – 10 – 15%
- Food – 10 to 15%
- Utilities – 5 to 10%
- Housing – 25%
- Transportation – 10%
- Health – 5 to 10%
- Insurance – 10 to 25%
- Personal Spending – 5 to 10%
- Miscellaneous – 5 to 10%
* Note: This list also depends on if there is any consumer debt outside of a mortgage. If there is consumer debt the percentages listed above will be altered *
- If I only have a specific amount of money to save, should I put it in my kid’s college savings before my retirement account?
- Retirement account!! There are many additional resources and techniques to get your child through college with minimal student loans.
- Retirement account!! There are many additional resources and techniques to get your child through college with minimal student loans.
- How much should I save for an emergency?
- We suggest 3 – 6 months expenses. Your emergency fund is a “comfort” fund. The total in this account will be different for everyone based off their personal comfort level when a financial emergency happens. Some people may desire to set aside 1 year of expenses and others may desire an emergency fund for their emergency fund. Everyone’s comfort level is different. The point here is to determine how many months it will take to bring a sense of peace in your home if a financial emergency were to happen.
- We suggest 3 – 6 months expenses. Your emergency fund is a “comfort” fund. The total in this account will be different for everyone based off their personal comfort level when a financial emergency happens. Some people may desire to set aside 1 year of expenses and others may desire an emergency fund for their emergency fund. Everyone’s comfort level is different. The point here is to determine how many months it will take to bring a sense of peace in your home if a financial emergency were to happen.
- After I get out of debt, should I pay more on my mortgage or put that money into a retirement account?
- Both if possible, but if we have to choose one it would be retirement (IF all other consumer debt is gone!!). Compound interest is our friend for long term investments. The longer your money can sit in a retirement account earning an average of 8-10%, the better off you will be in the long run. Yes, we know that 8-10% return is on the lower side of what you will find when googling this question. We err on the lower side to keep our goals / aspirations more realistic. Also, if you plan on 8-10% growth anything above that will be a nice added bonus!
- Both if possible, but if we have to choose one it would be retirement (IF all other consumer debt is gone!!). Compound interest is our friend for long term investments. The longer your money can sit in a retirement account earning an average of 8-10%, the better off you will be in the long run. Yes, we know that 8-10% return is on the lower side of what you will find when googling this question. We err on the lower side to keep our goals / aspirations more realistic. Also, if you plan on 8-10% growth anything above that will be a nice added bonus!
- What does tithing actually mean and does that go on my budget?
- YES, tithing / giving should be at the top of the budget. Tithing means 10th, which means we should set aside the first 10th of our pay to tithe / give. Doing this allows us to live off the remaining 90%. Living a generous life is one of the most rewarding a person can experience! Living a life with an open hand allows our money to flow in and out, but within our guidelines (remember, our budget : ) ).
- YES, tithing / giving should be at the top of the budget. Tithing means 10th, which means we should set aside the first 10th of our pay to tithe / give. Doing this allows us to live off the remaining 90%. Living a generous life is one of the most rewarding a person can experience! Living a life with an open hand allows our money to flow in and out, but within our guidelines (remember, our budget : ) ).
- How can someone who loves systems work together with someone who loves goals to create a financial and life plan?
- This one is a great one! I feel many of us fall into these buckets, unless you are a free spirit and have to constantly rein yourself back into reality : ) . To answer this one I’ll break it apart to describe both and then answer how they come together.
- System Oriented Mindset: People who like systems tend to lean towards order and process. Everything is done purposefully and in order. They prefer structure and creating a solid plan. They enjoy the journey of building out a strategy and creating a path to achieve their desired end results.
- Goal Oriented Mindset: People who like goals tend to think bigger picture. They are maybe the “dreamers” and are always looking far off into the future and setting long term desires (goals). Their mind is always thinking about the next thing, maybe even before completing previous goals.
- Working Together: For this pair to work well together a few things must take place. First they must know and respect each other’s desired thought process. Second, the couple should have their discussions in a structured order by discussing and agreeing on goals, and then coming up with a system to reach those goals. Both people should contribute to the discussions, and if you haven’t guessed it by now, each person will have a specific task to walk a unified path. The goal oriented mindset can bring all their ideas to the discussion and once both people agree on some (or all), the system oriented mindset can start their magic of laying out a plan. The selected goals as well as the plan to get there must be agreed upon by both people. This agreement will also help hold each other accountable. When working in harmony, this pair is next to impossible to slow down.
- System Oriented Mindset: People who like systems tend to lean towards order and process. Everything is done purposefully and in order. They prefer structure and creating a solid plan. They enjoy the journey of building out a strategy and creating a path to achieve their desired end results.
- This one is a great one! I feel many of us fall into these buckets, unless you are a free spirit and have to constantly rein yourself back into reality : ) . To answer this one I’ll break it apart to describe both and then answer how they come together.
- What’s the #1 thing (or Top 3 things) that I need to do to change my financial situation?
- This question is tricky because it will be different for every situation, and could probably take up an entire blog for a detailed response. On the surface here are the 3 items that will help change everyone’s financial situation:
- Decide you want to change
- Create a budget and attack your consumer debt
- Save 15% into a retirement account
- This question is tricky because it will be different for every situation, and could probably take up an entire blog for a detailed response. On the surface here are the 3 items that will help change everyone’s financial situation:
- How can I ensure my spouse is on the same page with our saving and spending plan?
- Communicate, communicate, communicate…… Did I mention communicate? J The best way is to have discussions around what you both desire. In a relationship there should always be a compromise. Compromising prevents one person from determining the hopes and aspirations for both. Communication and Compromising are the best ways to stay on the same page and build a solid financial future and ensuring both will stick to the plan.
- Communicate, communicate, communicate…… Did I mention communicate? J The best way is to have discussions around what you both desire. In a relationship there should always be a compromise. Compromising prevents one person from determining the hopes and aspirations for both. Communication and Compromising are the best ways to stay on the same page and build a solid financial future and ensuring both will stick to the plan.
- How do I manage a budget when my income fluctuates each week or month (e.g. commission-based or fluctuations in hours)?
- This can be a bit tricky, but there are a couple things you can do to try help in situations where there is irregular income.
- Build your budget to the average amount you receive for your lowest 6 month timeframe. This will allow you to base everything off what your average lowest month totals are.
- Create a “fluctuation fund”. The purpose of this fund would be to use as a buffer for times when your income is lower than your budgeted monthly necessitates are. When funds are removed from here they are to be replenished on the months you have a surplus.
- Pick up a side hustle to help during the low income months.
- This can be a bit tricky, but there are a couple things you can do to try help in situations where there is irregular income.
- I feel like I’m missing out on financial opportunities that others have (e.g. investing in the stock market) when I’m just trying to eat and pay bills. What advice would you share?
- Focus on you and your household, NOT on what others are doing. Focusing on others instead of our own house hold is what helps drive up our anxiety / stress levels as well as keep us in debt! Who has time for continued anxiety / stress after 2020? I know I don’t! Investing in single company stocks is risky. We would advise looking at other brokerage accounts, mutual funds or other retirement account offerings before investing in a single stock. For specific investment account recommendations you will need to work with a Financial Advisor.
If investing in the stock market is a desire of yours, the first step needed is a decision. Yes, you need to make a decision you want to invest in the stock market. Then a realistic budget is needed. When creating this budget it’s very possible some difficult decisions will need to be made. Difficult decisions like cutting cable, changing phone plans, selling some things, picking up a side hustle, etc… These decisions may allow your investing desire to be built into your current financial situation. Investing like this should ONLY be done when all your consumer debt is gone besides your house. Doing this while having lots of consumer debt will only amplify stress because of all the outgoing money.
- Focus on you and your household, NOT on what others are doing. Focusing on others instead of our own house hold is what helps drive up our anxiety / stress levels as well as keep us in debt! Who has time for continued anxiety / stress after 2020? I know I don’t! Investing in single company stocks is risky. We would advise looking at other brokerage accounts, mutual funds or other retirement account offerings before investing in a single stock. For specific investment account recommendations you will need to work with a Financial Advisor.
- I’m self-employed. How can I save for college for my kids while not penalizing them on the FAFSA form?
- Saving for our child’s college is something we should do when all of our consumer debt (except our house) is paid off and we are already saving 15% into our personal retirement accounts. This is done through what’s called a 529, an education savings account. There could be some tax breaks as well for you when investing in these accounts. Anyone can open one without even working with a financial advisor!
In regards to penalizing them, we would need more background story on this part of the question. There are a number of creative ways a child can go through school with minimal debt as well. There are many scholarships, grants, student work programs, PT jobs, etc… Here is a link to blog that discusses these in more detail, and also includes links to other sites for scholarships, grants and other resources: https://www.daveramsey.com/blog/pay-for-college-without-student-loans
- Saving for our child’s college is something we should do when all of our consumer debt (except our house) is paid off and we are already saving 15% into our personal retirement accounts. This is done through what’s called a 529, an education savings account. There could be some tax breaks as well for you when investing in these accounts. Anyone can open one without even working with a financial advisor!
- What suggestions do you have for me regarding my stimulus check?
- This will depend on your personal situation. There are many things we could do, but to figure out the BEST thing we would need to look at our Opportunity Cost. This means we need to look at what we are losing out on when we make our decision. An example here would be if we buy a grill we lose out on taking the family to a nice dinner. Another example could be, if I take this vacation, I lose out on the opportunity to fund my IRA (retirement account).
- This will depend on your personal situation. There are many things we could do, but to figure out the BEST thing we would need to look at our Opportunity Cost. This means we need to look at what we are losing out on when we make our decision. An example here would be if we buy a grill we lose out on taking the family to a nice dinner. Another example could be, if I take this vacation, I lose out on the opportunity to fund my IRA (retirement account).
- What software do you recommend for me to keep track of my finances?
- There are a few different ones out there, but here are 3 that I would recommend:
- Mint – This one my family personally uses and we love it. It links everything together and lets you know how you stand with the budget you input into it. Their app is also easy to navigate.
- EveryDollar – This one is also easy to navigate and use. There are a couple limitations we ran into when trying to use it which is why we moved over to Mint. This app would be great for starting out and using for your budgeting needs.
- Personal Capital – I have never used this one, but it looks very similar to Mint. They have a demo loaded if you download the app so you can click around and see what it looks like and how the interface functions.
- There are a few different ones out there, but here are 3 that I would recommend:
- I owe a lot of money on my taxes each year. How can I reduce the amount I owe?
- There are a few things you can do here, but I wouldn’t try any of them without discussing it with your tax accountant. They will be able to more accurately assess your situation and build a plan best suited for you.
- You can increase your dependent numbers. Doing this adjusts the amount of taxes that come out of your check.
- Contribute to IRA accounts. Doing this with after tax dollars provides you a tax break.
- Increase your giving / donations. By increasing your giving / donations, this also provides you with a tax break.
- There are a few things you can do here, but I wouldn’t try any of them without discussing it with your tax accountant. They will be able to more accurately assess your situation and build a plan best suited for you.
* Note: We are not recommending anyone do these things before discussing them with your tax accountant. *
If you find yourself feeling stuck and ready for some change, we are here to help. We build custom plans for each of our client’s needs, and the initial consultation is complimentary! Yes, the initial consultation is complimentary so what have you got to lose? Start planning and preparing today for a brighter future tomorrow!
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