Savings: Does Your Desire to Save Match Your Reality?

“The only money that’s really yours is the money you spend.

Everything else goes to somebody else.”

Teddy Chafolious

Piggy Bank

That piggy bank we remember from childhood wasn’t just a place to store our birthday money and spare change: it was a lesson, a way our parents encouraged us to get into the habit of saving. Many parents even go so far as to deposit half of any monetary gifts their children receive directly into a savings account, just to drive the point home. Adults who took that lesson to heart might set up automatic deposits into long-term savings or retirement accounts from their paychecks every month – a modern mechanism for implementing this age-old lesson.


But the quote from Teddy Chafolious raises an important point: What are we saving FOR? Many new investors come to their financial advisors with a number in mind: “I want to save $1 million before I retire.” There’s even something of a fad among millennials who work as hard as they can, save as much as they can, and try to retire before age 50.


But why? After all, “you can’t take it with you.”


It’s important to have financial goals and committing to a regular savings plan is good first step towards achieving them. But if you treat your long-term financial planning as just a series of targets to hit, or numbers you have to drive up as much as possible, your return on investment is going to be a lot higher than your Return on Life – the feelings of happiness and fulfillment that your financial planning should provide you.

How much are Americans saving?

According to the US Bureau of Economic Analysis, Americans today are saving a lot less than they have in years past. Personal savings in the United States averaged 8.29 percent from 1959 until 2017. The rate for 2017 is hovering around 3 percent. Experts tie this historically low savings rate to increased household spending, which continues to outpace wage increases, and high levels of revolving debt, like credit cards.

Figures like these drive many people to the opposite end of the spectrum: they save as much as they possibly can, especially if they’re nearing retirement.

Finding balance.

We tend to think that the person saving more is doing a better job of managing his or her money than the person saving too little. But neither extreme is going to maximize your Return on Life. Spend too much enjoying the now, and you might end up having to work much longer than you want to – maybe even all the way through retirement. Save too much too early, and you and your family might miss out on the experiences that you deserve to enjoy with your hard-earned money: big family vacations, a new home, creature comforts, entertainment and culture that will enrich all of your lives.

Worse, new retirees who have spent their lives stuck in “savings mode” often have trouble transitioning to the reward mentality that should provide for a meaningful retirement. These retirees worry so much about running out of money that they often neglect their own wants and needs, to their emotional and physical detriment.

Reality check.

So how do you find that balance between enjoying today and preparing for tomorrow?

First, ask yourself if your rate of savings is in line with your reality. Are you saving so much that you’re not enjoying life as much as you could be? Or are you hovering around that 3 percent savings figure, telling yourself that you’re putting enough money away when you know, deep down, that you’re not?

Next, make an appointment with us to talk about your financial goals, and your vision for a dream retirement. Work together to find that saving/spending balance that’s going to align your savings with your reality, and hopefully, your goals and dreams. Find that sweet spot, and your money won’t just be numbers on a balance sheet. It will be yours.



Financial Freedom for Older Adults

Financial Freedom wooden sign with a beach on backgroundThe word “financial” is not often followed by the word “freedom,” and yet financial freedom has never been more possible. With the advent of online money-making platforms, the constant influx of new products that yield substantial returns, and the continuous stream of budgeting ideology that floods the marketplace, we should be one of the most financially sustainable generations in history. The missing key for unlocking this possibility is very easily just an understanding that we aren’t supposed to be led by our money- we are supposed to be in charge of it.

So what can you do differently to make sure that you have the say over what happens with your money and that your future is financially secure? There is always something you can do to improve in every area of life, especially in money management.

If retirement is on the horizon, make sure you have all of your real estate ducks in a row. Do your best to have your mortgage paid off before you retire to avoid having a payment to contend with when you’re no longer working. If you have successfully decluttered as your children have grown and as your interests have changed, it may become clear that your house no longer fits your needs. If it’s time to downsize, you open up more opportunity to save: by selling your home and moving into a smaller house, you can pad your savings with extra money to help with assisted living or medical costs down the road. Or you could add some real estate to your investment portfolio. Maybe it’s time to get the vacation home you’ve been eyeing — you can always offset payments by renting it out when you aren’t using it.

Next, consider your budget. Unfortunately, only a third of the American population admits to keeping some type of budget for their income. For those keeping score at home, that means two thirds of Americans don’t layout or maintain a plan for their finances. The point is simply that if you aren’t sure where your money belongs on daily basis, it will be harder to plan for the future.

Have you ever taken a road trip to a new vacation spot without a map or a GPS? Having a plan makes all the difference in whether you successfully arrive to your destination. A budget is a plan of action, meant to navigate you through your future. You can start the easy way, by separating your finances into three categories: money for charities, money to save, and money to spend. Once you have determined the percentage of your income that belongs in those major categories, you can break it down further and be as detailed as necessary. There are several ideas behind budgeting worth considering, and you can use the one that best fits your lifestyle.

Before you know it, budgeting will become second nature and you won’t have to question where your money has gone. By the end of the year, you will likely be surprised at how much you were able to save based on your projected plan. Your budget will also help smooth out the tax filing process, because you will be fully prepared with the financial details that you are asked to include in the paperwork.

If you are over 50 years of age, you won’t have to use that hard-earned, well-saved money on hiring someone to help. The AARP organization has a program that provides a volunteer to assist you with your taxes, and for those over 60 years of age, the IRS provides a similar service through TCE volunteers. All you have to do to take advantage of either opportunity is to contact a location closest to you to set-up an appointment.

After you have used all of the applicable senior  tax deductions and benefits, you can use your substantial refund to build an emergency fund, invest in a small side business, or increase your savings account. You could make an extra payment on your home or use the money to upgrade a few things around your house. Then, sit back and enjoy the fruits of your labor, delightfully knowing that you have handled your money the smart way.

A healthy handle on your bank account is just a financial blueprint away. Making savvy real estate decisions, budgeting, understanding what tax benefits are available to you, and carefully managing your tax refund are all easy stepping stones toward financial freedom. Don’t be overwhelmed by the future, but be excited about the possibilities.