Financial Planning?

Updated on June 06, 2012
A.G. asks from Mansfield, TX
13 answers

Ugh!!! We have got to get on a financial plan. I have figured out that my mind does not like the term "budget"--it sounds so restrictive to me. Anyway, . . .

We followed Dave Ramsey's plan a few years ago to wipe out our debt. We currently have a mortgage and two car payments--one at 0% and the other at 2.?%. We have no other debt. We do have some money in savings, but we haven't officially marked it in our heads as "retirement savings" or "college fund" or whatever. How do we know how much to save for retirement? Do we pay off the cars even though the interest rate is so low? I think my husband and I should see a financial planner. My husband and I talk about "we need to get on a budget" periodically, but we don't follow through with our ideas. For me, I think it is because I need a concrete plan to believe in. Does that make sense??

How do you decide the level of lifestyle you want to have and when? We are very comfortable now, but won't be later if we don't start saving. Do you sacrifice (to the point that you are not comfortable) so that you can be extra-comfortable later?

What do you think about us seeing a financial planner? Or, do we just guesstimate what we should save and stick to it? What about saving for big things like a kitchen remodel? How does that work? I feel so dumb asking this stuff. It shouldn't be so difficult for me. I am a smart girl. : )

Sorry, this is a bit "all over the place," but I'd love any insight you may have.

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answers from Miami on

Here is my disclaimer - I am a financial planner. I am also Series 7 and 66 licensed (I can sell stocks, bonds, mutual funds, and managed accounts, REITS, etc.). It sounds like what you need to do is to take a look at your assets and debts (which you seem to have done) and then have some discussions with your husband about how you want to see your life in 20, 30, 50 years.. What do you each want out of retirement and what is important to you? In holistic financial planning, you should also consider risk management - life insurance and other types of insurance.

The first thing I would do is to take a look at your current insurance and see if it meets your needs. I am not a huge proponent of making my spouse a multi-millionaire if I should die early but I do want to be sure that he has enough to hande taking care of a 6 and 1 year old on his own - including a nany if he needs to work nights/weekends, etc. As he is actually our primary breadwinner, I've had him increase his insurance so that I wouldn't have to fire sale any of our assets if he should unexpectedly die early.

You do need a concrete plan and you need to stick to it if you want to have a very comfortable lifestyle in retirement. You mentioned "college fund" - you need to decide just how much you want to help your child (ren).

I usually recommend taking advantage of whatever retirement plans you have available to you - the highest match possible if either of you has a matching 401K or 403B. If you are not working outside the house, fully fund an IRA annually. You need to save for your retirement also - whether you work outside the house or not....IRA contributions for non-working spouses are fully tax deductible.

After you have your rainy day fund and your retirement plan funded, then you can consider either general savings or a specific college fund. Your state has income tax so there may be state income tax savings to working through a 529 plan if you have more than one child. I try to remind my clients that you can always borrow for college but there are no loans for retirement!

A true financial planner will charge you an hourly rate to create a plan. You need to decide if you want a book, spreadsheets, a computer program, etc as the outcome of your plan. If you meet with an investment advisor, then you are normally not charged for your consultation as the advisor will end up investing your money for you and be paid a commission. This may be beneficial but beware that at a bank, the person is paid to sell the banks' products and has an incentive to sell items that may not be suitable for you. A financial planner either does not sell product or is usually independent so they have no quota or obligation to sell anything that is not suitable.

Feel free to contact me if you have other specific questions - oh, saving for a kitchen remodel - either a savings account or a CD...depending upon when you plan to do it.

Cheers, C.

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answers from New York on

So many great questions.

I to hate the term budget. Basically what it comes down to is how much income to you have verses how much liability/expenses you have. It really does help to write it all down. Should you decided to see a financial planner, they will ask for this information.

Personally, I'm not fully on board with "debt free". IMO whats wrong with have a car payment at 0% interest. (unless you are struggling to make the monthly payment). You're actually making money. I would question the 2% and work on paying that off.

I also am a huge fan of credit cards, because it's free money. I charge things to take advantage of savings and rebates. Target gives me a 5% savings, Kohl's gives me 15%, BJ's 2%. I'll have over $500 towards our next Disney vacation. I don't pay any interest because when I make these purchases the cash to pay for them is sitting in my savings account earning interest. I keep that cash for at least 20 days.

You should be saving for retirement. If your employer has a plan contribute. I don't know why this sticks in my head, but I believe it's recommended that 15% of your gross income be set aside for retirement.

A few years ago my employer paid for all employees (if they chose to) to have a one hour consultation with a financial planner. I found it to be very informative. They had me fill out some worksheets lists of assets and budget ahead of time. It was very informative. Should you decide to meet with someone, be prepared. Have a list of questions with the most important at the top of the list. That hour consultation went by fast and of course, he was looking to sign us up for additional business. They really helped with the retirement questions and also some good advise on college savings.

My rule is to pay yourself first. I have direct deposit. Part of my paycheck goes towards my 401K, another set amount goes into a savings account, the rest into my checking account.

As far as saving for a big purchase like a kitchen remodel, I just put money into my savings account that contains my emergency fund on a regular basis.

The type of lifestyle and amount of comfort you have is a personal choice. It's a very difficult question to answer. We decide what's most important to us as a family and what we can live without. We love our vacations and I place a high value on educational experiences (mostly field trips and camp) for the kids. The bottom of our list is electronics, we have old tv's and basic cell phones. For one of my friends who lives pay check to pay check, cell phones with texting and internet service are on the top of the priortity list.

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answers from Boston on

We have not seen a financial planner yet either since we know a few that were mechanics or engineers a few months earlier and took a course and now do not seem qualified to me to handle our money. I do not know who I could trust. I was told to find one that charges a flat fee instead of getting an hourly rate. We are going to start by talking to someone at our bank - at least they have a history of working in finance. But we have paid off all our debt, and we save every month. First we save into our savings account, and once it accumulates to a nice amount we move it to an retirement account. We do keep cash in the savings account for car and home repairs, and a separate "mental account" for buying the next car cash.
You could start by at least creating 12 pages in a notebook with the expenses you have every month, since some bills are monthly/quarterly/yearly. That way you will know how much you will minimally need to pay each month. Then write down which days you get paid on each monthly page and how much. Then try to decide out of which pay check you will pay each bill, and that will show you how much you will have left every month for living expenses and saving. First take out the savings and put it into its own account. Then when you see the remainder you can decide how much money you have each week for groceries and other true needs (shoes, clothes, gas). Not only will that make you think next time you plunk down $4 for a latte, but you will need this level of detail before any financial planner can give you any advice. They need to see everything coming in and going out, as well as a total of your assets (house, car, 401K, stock, etc.). You can also ask your credit card company to give you a breakdown of your spending - $xx on gas, $yy on restaurants, $zz on clothings, etc. That way you will have a good idea where your money is going, and what you can reduce. So get started with the notebook and other data gathering and then you can decide if you need someone to help you.

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answers from Columbia on

I'm a saver by nature, so I was already on the debt-free train when I found Dave Ramsey. However, Mrs. On Purpose was not.

We had a savings (luckily it was about 6 months of expenses).

Then we paid off the credit cards (hers).

Then we paid off the car. Every month, as much as we could spare and basically didn't add to savings except for maybe $100/month. Took 2 years.

During this time we budgeted our "bills" and our "spending". Bills meant the house, electric, tv, etc. Spending was our discretionary (at first) - lunches, date nights, etc. It now includes groceries and every purchase that isn't on the credit cards. Credit cards get the mechanic, gas, electric, newspaper and tv.

We eat out fast food once per week (cash).

Date night is once per week (or every other depending) - cash.

We are also currently building a house - so currently every penny is going to savings to cover the downpayment. After that, we'll start the snowball again, but the only debt we have are 2 mortgages and one student loan (wifes) - that we also only pay the minimum due to interest rate.

A financial planner may help you get organized, but the actual "doing it" is just a state of mind. Pick a debt- pay it off - and see how that feels. It felt so good to us, that keeping a budget now is just secondary.

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answers from Madison on

Well a good rule of thumb for retirement is you need to have 30 times what you make now for retirement if you want to live the same way in retirement as you do if you make 100,000 a year now you will want 3,000,000 saved up by the time you retire

Now you might think well I wont have a mortgage, car payments etc. so I wouldn't need as much as you do now...well their is inflation and all sorts of other thing to consider.

Now say you are suppose to recieve 2000 a month in Social Security after age 60 when you want to retire then you would get aprox 720,000 for that which means you could (although I wouldn't suggest it )save that much less yourself for retirement.

In a nut shell if you think you are going to live for another 30 years after retirement (some people do) then you have to save for 30 years of retirement :)

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answers from Jacksonville on

I think seeing a financial planner is a smart move. Or you could meet with someone from your bank. Either way, you will be given a lot of information to think about. Sometimes, it can even be helpful to visit more than one party (planner/bank) to get some various viewpoints. Not all planners have the same ideas about what you will need, though the good ones will take YOUR comfort level into account. The reason I suggest seeing several, is that you don't seem to KNOW what you want or are comfortable with (or without).

As for a budget, in a situation like you have, (not drowning in debt, but just wanting to find a "level" to live at) I have found that it usually works best to go really hard core for about 2-3 months, and see what really "hurts" you to do without. Then, after a few months of scrimping, you can adjust your budget with more emphasis on the things that you missed the most.
Go bare bones on a written budget and track everything you spend on. Everything. That quarter in the bubble gum machine for your kid while you are standing in line somewhere? Write it down.

After the first month, spend cash only. (I say after the first month, b/c you'll need that first month to get an idea of how much you'll NEED to have in cash).
Every receipt gets written into a ledger under whatever category you want to label it. When you hit the limit for a category, you are done and can spend no more. OR, you can take $ from a different category and put it into the desired one (and spend less than you allotted in the 'borrowed from' category). It's one thing to carry around only cash and when it is gone, it is gone. But it is extremely helpful to know what you spend it on, also.. and which categories go the fastest. It tells you something about your spending habits and your "problem" areas as well. The places you need to be careful not to go over...

Then, after you start "feeling it", and you develop a good sense of what you can "allow" yourself to do, you can revise/revamp your budget. Add to areas you weren't as comfortable as you'd like, and reduce any areas that maybe you didn't seem to need. The "extra" money that isn't required in your monthly budget goes into your savings. And you will have an idea (I presume?) of how much that will be each month.
Then you can have a separate budget for that.

Our "savings" budget includes annual expenses. Because it just works for us to do it that way, since we have payroll allotments that go directly into savings. Car insurance paid per 6 months, homeowner's association dues, flood insurance, vacations, Christmas, birthdays, anniversary, etc... anything that we know we will spend more than can reasonably be covered in a regular budget (like using $20 out of the grocery budget for something unexpected). The items in the "savings/annual" budget are not surprises. Our anniversary comes every year. Christmas comes every year. Birthdays come every year. We have to buy new clothes for the kids every year around school starting, etc. The T-shirt I picked up at Target can be "covered" by spending a little more carefully at the grocery store this week. Buying both kids new shoes, backpacks, jeans, and a couple of tops.... that is something that needs to be in a written budget/plan.

And here's the longterm thing. In your "savings" budget, you include things like the kitchen remodel. Or, once you have paid off your vehicles, you include a fund for a new car (so that when you are ready to buy you HAVE THE MONEY already, and don't need to have a 'car payment' ever again).
And, after some financial planning with a professional, you will also have your long term retirement accounts being funded as well.

But, at least once a year, go over the budgets again. And go hard-core for 2-3 months afterwards again.

It really does work to keep you motivated, appreciative, and prepared.

Good luck.

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answers from Washington DC on

talk to a financial planner....a reputable one in your area...dont take advice from here. the finacial planner can plan u down to college, retirement, and have exttras, they find money where u didnt see it.

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answers from Minneapolis on

Do either of you have retirement plans offered at your place of employment? I would take full advantage of that first because it is very easy and there are usually matching funds that the company contributes (401K or Simple IRA plans are the most common). The nice thing with this is the money is taken out of your pay check and deposited promptly into your fund. Then meet with a financial planner. They will assess your overall assets and liabilities, discuss the level of risk, set up an appropriately balanced action plan for your situation.

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answers from Boston on

Do either of you work for a company that has a retirement savings plan? If you do, that can be a good place to start. Many employer-sponsored retirement plans have on-line calculators that are a good place to start to at least figure out how much you should be saving for retirement as well as other goals. Some plans even offer you free or low-cost access to a real, live financial planner. Retirement savings and college savings should be done in investment vehicles specifically set up for those purposes so that you can enjoy the tax benefits associated with each type of saving account. Just dumping some money is a savings account at a local bank is not saving for college or retirement.

How much you need to save for retirement varies from couple to couple. Things like how old you are now, whether or not you'll have a pension, will have retiree medical insurance from an employer, will own your house that you can sell and downsize, will work until 62 or 65 or 67 before drawing on social security, your current income and expected cost of living at retirement all factor in. But the bottom line is that most people are shocked and are not saving enough. Most of us will need to have over $1M in the bank (that includes pension money) to retire. Yes, I typed one million dollars. Fully funding an education account for a child wanting to go to private school is $125 - 200K in today's education dollars.

Anyway...if you don't have financial advice available to you through work then do see a planner but ask friends, families and co-workers for recommendations. You definitely want a flat-fee person who doesn't make money selling you things. Again, if you have an employer-sponsored retirement plan, that's usually the best place to start your retirement savings due to tax advantages and employer match - a commission-only FA would try to sell you a separate retirement plan with higher-cost investments and higher account fees than what you would pay through work.

Many employers also offer 529 plans but if yours doesn't, your state does offer a tax break on contributions to it's state-sponsored plan, so that's usually the best bet. Your state's plan is run by Oppenheimer investments and includes investment by reputable, sound asset managers. You can sign up for this directly - no need to pay a fee to an FA for this. is an on-line personal finance site that tracks all of your finances. There are some goal setting tools there that I find very helpful and it motivates me to keep up with our goals like getting out of debt and saving for retirement, saving for holiday spending etc. You may like that as well.

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answers from St. Louis on

At 0% it is clearly better to keep the loan. Think about it in terms of what could the money be making if you didn't put it on the loan. If that number is above 0% you are better off keeping the loan and saving the money or put it on the car with the interest rate.

2.whatever% is a little more difficult to analyze. Depends on how risky your investments are. When you look at the rates on savings accounts you are better off paying off the loan. If you are looking at safer market investments you could get around 4%. You also have to take into account time value of money but I really don't want to bore you with the math. :)

It doesn't seem like you need a financial planner but perhaps see what your bank offers for free. A lot of banks and credit unions offer free financial planners so long as you invest in their products. In general it is a good deal for both you and the financial institution.

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answers from Washington DC on

Google compound interest calculator. You need to start saving as early as possible. People are living much longer. If you retire at 65 you may live to 95. So it can be 30 years where you need to live off your retirement money. Also a million dollars now isn't going to be that much 30 years from now... Talking to a financial planner may be good but find out a reputable one. Susie Orman says to first invest in your 401k plan first up to the amount they match your contribution. Then invest in Roth IRA.

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answers from Chicago on

Dave Ramsy is one of the best out there. I will still suggest go to a financial Planner - they give you an overall perspective not only the loan but all the other aspect - retirement, education, Investment, Insurance, ,ortgage and can analyxe your personal situation to advice you where to put the buck to maximize returns.

Some financial advisor do not charge the fess as they expect busness or referral. So look for one. I do not know which area you live in, otherwise I will refer you to mine.

It is a good decision to go with a written documented plan. Gives you a peace of mind and also helps you understand where you will be down the line. Also suggest you to revisit the plan every year. It really helps.

Any short term plans can be fulfilled by money market and for long term based on how long it is - the vehicle differs. Good Luck!

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answers from Chicago on


I feel your pain. I highly recommend talking with a financial planner and I have just the one for you, Lynn Torre at Financial Transitions Ltd. She in knowledgeable, has the highest certifications, will do what's right for you and is not pushy. She can be reached on ###-###-#### or tell her S. sent you. If you would prefer to have her contact you, send me a message with your contact info.

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