None of us wants to think about our future; we want to live for the here and now. However, the here and now is what we need to think about because we’ll find the future upon us quicker than we were expecting it to be. Suddenly we might find ourselves not having enough money to live on, let alone in comfort, or at least in the manner we were living when we were earning our money.

by Pedro Figueiredo

There was a report on our local news stating that most people who retire and had set up a 401K savings plan don’t have close to enough money to live the life they’re used to living. The average comes in around $149,000, which sounds like a lot of money until you think about just how long you might have to live off it.

If you lived another 20 years that’s only around $7,500 a year, if that. Sure, you’d have your social security money, but with the way our government keeps playing around with it how secure do you feel in trusting them?

How much money do you need for your future? For each person that’s a different answer. What you need to do it think about how you want to live your future. For instance, you might need less money if you’ve paid off all your debt, which includes your home, before you retire. If you decide to sell your home and live in an apartment, depending on how much you could sell your home for, that could help drastically.

It’s complicated trying to figure out how much money you might need because everyone has different needs and wants. What most of us don’t think about is how much we might need when it comes to paying some of our medical expenses. An article on The Motley Fool estimated that an average couple over age 65 might need upwards of $260,000 just for that purpose, and another $130,000 if either has to go into a long term care facility. That sounds pretty scary doesn’t it, especially when compared to that $149,000 mentioned above.

It’s too bad most of us don’t start a savings and investing plan 20, because we’d all be set by age 65. If any of you have kids around that age, share the linked article with them to help protect their future. For the rest of you, if you’ve got the nerve, check out this retirement savings calculator from Kiplinger to see where you might possibly stand.

If you want to live a simple life, you could probably get it done. If you were hoping to travel or help the grandkids with college, make changes to your house, keep buying nice clothes and the like, you’re going to need a bit more money… and you can’t trust your luck in winning the lottery.

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If you’re young enough, at least in your early 40’s, one of the best things to do is contact a financial planner to help you make long term decisions. I’ll caution you and let you know that many of them are going to try to talk you into getting insurance first, especially if you’re married, and that’s not be a bad thing. It will be another expense you’ll have to plan for, but at least your immediate family is taken care of if you pass away.

They will help you figure out how much money you need, as well as figure out your risk tolerance to investing. This is important because if you want a lot of money, your financial planner might have to risk your money on deals that will work one day and burn you on another day.

There are other things that are crucial to helping your financial status in your later years. You have to come to grips with the reality that it’s probably best to pay down current debt versus saving for the future. Sorry it’s a competition between the two but let’s look at it in a couple of different ways.

First, debt based on interest rates. Accruing credit card debt usually runs between 9% up to 29%, although the average rate is around 18%. If you only owe $500, that’s not a big deal. However, if you owe $3,000 or more, and you’re not paying more than what you owe on a monthly basis, you’re never going to pay that off, especially if you don’t stop spending.

Second, debt based on amount of your monthly payment. If you can get out of paying a monthly mortgage before you retire that’s anywhere from $500 to over $1,000 a month you can use for other things. Big hospital bills, loan amounts or even a large credit card amounts with great interest rates probably have large payments that will impact your monthly stash.

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It’s going to be hard to rely on just your social security when you retire, but it’s the best place to start looking at any monthly income you’ll have coming to you. If you can eliminate most of your outstanding debt, you might be able to get by on $4,000 a month.

Anything less and you might be in trouble. Think about it this way. Even if you’re making enough to take care of your general expenses, things are going to happen where you’re going to need some extra cash. Car repairs, dental and physician expenses, broken glass, new shoes… these are things that are going to come along and you’re either going to have to address them or let things go… and the second part will lead to a horrible life experience.

Nothing says you have to retire at 65, and these days more people are working into their early 70’s. It might be a scary proposition but I tend to believe it’s always better to know where you might stand than to not know. The earlier you can start thinking about it, the easier it will be for you to start saving what you might need, or planning to do other things for your future.

If you’re married, be sure to have the financial conversation with your spouse because you’re in this together. Find ways now to relieve as much financial stress as possible. It’s never too late to get financial counseling advice, so do it sooner than later.

Always remember that you can’t run away from any problems, but especially financial issues. Challenge it head on and at least you’ll be prepared to do what you have to do to survive… and hopefully you’ll do so living pretty well.

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How well do you track your spending habits?

I ask that question because a great number of people have absolutely no idea how or where they spend their money. This ends up with folks looking at their bank statements wondering where their money went, and sometimes leads them to either overdraw on their bank accounts or go over the limit on their credit cards.

buying food at a restaurant

Why is this important? Because while the Justice Department shows that the number of bankruptcies has decreased 5 years in a row since 2010 (the study goes through the end of 2015), Nerd Wallet shows that overall personal debt has increased over at least 12 years. Their points are:

* The rise in the cost of living has outpaced income growth over the past 13 years. Median household income has grown 28% since 2003, but expenses have outpaced it significantly. Medical costs increased by 57% and food and beverage prices by 36% in that same span.

* Total debt is expected to surpass the amounts owed at the beginning of the Great Recession by the end of 2016. [2] Americans will soon owe more than they did in December 2007.

* The average household with credit card debt pays a total of $1,292 in credit card interest per year. This could increase to $1,309 after the Federal Reserve voted on a rate hike of a quarter of a percentage point.

I go into each month with a general spending budget and what I call the “play” spending budget. The general budget covers monthly bills and general expenses such as gas for my car and part of my food budget. The play budget is entertainment and being able to eat out when I’m not in the mood to cook or go shopping for food to prepare at home.

I have to stick to my budgets whether I have a lot of money or finances are tight, because often what I generate has to last me a good long time. As an independent consultant, my income fluctuates. It’s harder for me to stick to a specific budget every once in a while so I need to make sure I take care of the important things first.

I don’t always write my figures down, but I can mentally keep track of everything I need to pay because the dates are the same every month. The general budget rarely changes (except for occasional yearly fees or medical bills) so it’s easy to keep track of the bills, which then helps me keep track of my overall spending.

Bills always come first for me; we need to make sure we take care of our living space before doing anything else… well, except for eating. Financial experts say we should pay ourselves 10% of our income first, but we don’t always have 10% to spend on ourselves first, do we? I’ve talked about finding different ways to put extra money aside in case you have emergencies coming up and, although it might not be 10%, saving any money is better than not saving at all.

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Only by tracking your spending can you both ensure that you can cover your bills and still live your life and make sure you don’t credit and spend yourself into debt, which could require extreme solutions to get out from under it. I’ve worked hard to eliminate most of my big bills so that I only have to worry about monthly bills that can’t be stopped (such as utilities, internet, etc).

People hate the word “budget”, but I believe it’s essential to giving us peace of mind. However, just because there’s a connotation of what a budget should be doesn’t mean it has to be cast in stone (although I would recommend tracking some of it on a spreadsheet to make sure you’re not missing anything). Even though I’ve helped people get control of their money so that they’ll show positive growth by budgeting, I also meet a lot of people who can’t handle something like that on a consistent basis.

With that as a background, let’s look at a few ways you can help track your spending that might be simpler to keep up with:

1. Set up automatic bill payments with your bank.

This one can work pretty well for most people as long as you have consistent income and are willing to do direct deposit, since most banks won’t work with you unless you allow it. It’s also the most flexible because every once in a while you might be able to get away without making a payment for a month or two and it’s easy to go online and change your dollar amount settings temporarily.

2. Set up automatic bill payments with your creditors.

If you have life insurance you’re already used to doing something like this. It works best if your payment will be close to the same amount each month and will save on any possible fees your bank might charge you to do it for you (yeah, some banks charge fees but not all of them; it might behoove you to work with a local bank). The downsides are that it’s harder to change the monthly amount, and that if you set up an account where sometimes your monthly payment is higher (such as if you have a business American Express card, which has a yearly fee that must be paid once a year) and you forget about it you might find yourself in a bit of financial distress for a short period of time.

3. Keep a running tab of how much you’re spending whenever you buy something.

This one will require a bit of work but you can make it a bit easier by only recording purchases over a certain amount. I’d probably say $10, which you can track using the memo function on your smartphone (or something like Evernote) or go into your online store and download a tracking app. If you’re buying a lot of things over $10 that should tell you that you should be more cautious on how you’re spending because you’ll find out that a lot of small purchases adds up pretty quickly, but maybe you can still buy your coffee and burger daily.

4. Use cash

This one will scare you, but I’ve found it helpful. It’s too easy to spend money these days because we put everything on a card, whether it’s a credit or debit card. I’ve found that we’re more cautious with our spending if we have to use cash. Time Magazine did a study which concluded that not only do people spend less money when using cash but they enjoy what they purchase more. I’m thinking that’s a pretty good benefit of using cash along with your money staying with you longer.

All of this requires some personal responsibility but it’s pretty simple stuff once you put your mind to it. You’ll also have more peace of mind when you know your bills are covered and you still have money to spend so you can enjoy a few things in life without worrying about phone calls and people showing up at your door looking for payment. Am I right?

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I struggled with the topic for this post because there are different types of financial counseling one might need, yet it would involve more than one person typically. The truth is that most people need financial counseling in one way or another, sometimes multiple ways. Whether it’s to make money or save money or not get penalized in some fashion because of how you used your money.

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Make sense? If not, don’t get discouraged, because here are 5 reasons why you might need financial counseling, and what type of counseling you might need.

1. You need to be put on a budget.

Do you make pretty good money yet never seem to have enough to last you until the next time you get paid? Are you making little money and struggling to survive?

You need someone to help you set up a budget. Only by setting up a budget can you possibly know how much money you actually have to spend, where you’ve been spending it, whether you have enough left over to save or buy things you need or want that are outside of the budget and, believe it or not, find some peace of mind.

It could be an accountant who you go to for help, or maybe an independent person who works with you to help you to set up a budget. For a little more per month you can employ them to pay all your bills for you if that’s something you keep forgetting to do, although it would probably be smarter to set it up with your bank to auto-pay your bills… if you’ve done your budget and actually have enough money each month to take care of them.

2. You have your own business.

When you’re a business owner with employees or a sole practitioner, you want to spend your time marketing and working your business. You don’t want to have to spend time keeping track of receipts, trying to figure out quarterly taxes and the like.

The best part about having someone else tracking these things is that it frees your time up so you can concentrate on your business, no matter what it is. You can pay someone to manage your books and expenses. You can pay someone to process your payroll.

You might also need a business consultant to help you figure out what else you can push off on others. For instance, you might want to find out if you can afford someone to do some housekeeping, cut your grass, shovel your snow, answer your phones or even pick up your dry cleaning. You might even need someone to help write your content if you have a blog. 🙂

3. You’re being hassled by bill collectors.

In this case, you’re not sure if you have enough money or not, but the pressure’s growing. Your first step should be Consumer Credit Counseling, which is in every major city. They’ll help you look at all of your bills to see if you’re making enough to pay your bills and still survive or not. The best thing about them is their evaluation is free.

Of course, we have to use that word budgeting again because it’s the first thing CCC or anyone else will do. If you’re lucky these folks will also call your creditors and try to work out deals on your behalf.

Any good financial counselor will do the same for you, even though it’s something you can do for yourself. The difference is that they’re not going to be emotionally involved and most of the time they’re going to know what to say to someone to help get you the best deal possible.

4. You want to put extra money away or start investing.

You may not need someone to help you put your money into a savings account but these days that’s little comfort and won’t help you increase your money any. If you’re talking about investing, either in something small like a CD or an aggressive money market account, you’re definitely going to need some kind of financial counselor.

I’ve known a few people over the years who felt that they had enough knowledge to invest on their own, and in today’s world it’s pretty easy to set up your own account at one of many investment companies online, although you need to be ready for a host of fees that will eat into your profits. Some people do very well… but it’s not often sustainable. It’s best to have a money manager who spends all their time reviewing the market and making the best decisions on your behalf.

This is one area where you need to make sure you can trust the person you hire to manage your money for you. There have been way too many stories about people like Bernard Madoff, along with athletes and musicians who have had the wrong people managing their money, not to do your homework in finding someone reputable. The best piece of advice is to interview more than one investor and make them prove how good they are by showing you their own portfolio… at least a good piece of it.

5. You want someone else to handle all of your money and just give you what you can spend, like an allowance.

It’s too bad you can’t always have your mother around to take care of these things, isn’t it? Accountants are great for this type of thing, but if your needs are relatively small and you can find one you can trust, find a bookkeeper instead.

However, you need to be smart about this one. Let someone else write out all your checks for you but you need to be willing to sign them all. This gives you the opportunity to see what you’re paying and keeping a handle on your money.

A good bookkeeper should be able to produce a monthly report of every bill they wrote up and had you sign, produce your bank statement matching up with each check, along with total amounts so you can keep track of everything and know whether you’re being cheated or not. Truthfully, if you’ve gotten to this level you might not even look at those reports, but at least you’ll have all your paperwork if you ever decide you need to hire someone else to audit your books.

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