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Tag: budgets

Getting married in 2021? How to budget for the big day and beyond

According to most bridal magazines, we are in the midst of what is known as “proposal season.”

TheKnot.com reports that nearly 40 percent of all engagements happen between November and February, with five of the most popular days for proposals landing between those four months. So, for many of you, wedding bells might be ringing soon.

For those who will be planning a wedding this year, I suggest getting your financial house in order before walking down the aisle. While finding the perfect dress or venue might be at the top of your to-do list, making sure you’re on the same page financially as your partner should also be a top priority. Reviewing a financial checklist is a good start. Here are some things to consider as you begin the discussion:

Combining bank accounts

If you share a home or apartment, odds are you also share the expenses as well, especially if you both work full time. A joint checking account can make life a lot simpler because you have a record of what you spend all in one place. You should also keep separate accounts for individual personal expenses. With your separate accounts you can each make a deposit every month into the joint account to pay the common bills.

Planning for retirement

Is saving for retirement a common goal? Do you both agree to put away money every month into your respective 401K plans? Do you save money annually with a Roth IRA or a regular IRA? A Roth IRA is a much better option if you qualify and do not make more than $206,000 jointly. Withdrawals after age 59½ are tax free. With a regular IRA you must pay taxes on withdrawals when you start taking them. You also need to decide who is going to manage your investments. Are you going to hire an investment professional or designate one of the two of you to do it? Sorting out those decisions now will result in less confusion later.

Household Budgeting

If you are sharing expenses that are not fixed every month like rent, how do you also decide on what to spend on food, utilities, cable or eating out? It is important to sit down at the kitchen table with all the monthly bills to set a budget together. You should review what you are jointly spending at least quarterly to make sure you are not wasting money on expense that don’t make sense, such as cable service you don’t watch.

Debt

Student loans, large credit card bills, or low credit scores can cause some real problems in a marriage. Better to discuss these debts before you get married. With interest rates so incredibly low today you should look to refinance all your debt at lower rates or pay debts off with excess cash.

Contact the three credit bureaus to obtain your latest credit scores. If they are lower than you think they should be, obtain a copy of your scores and see if there are any mistakes.

With fraud these days, it’s wise to check your reports to determine if identify theft could be erroneously causing you to have a lower score, which hurts you when buying a home or automobile.

See if there are ways to improve your score, such as signing up to pay bills automatically, to avoid paying late and racking up fees and marks against your score.

Prenuptial Agreements

If you are planning on getting married and your significant other has outside investments, owns their house, has investment accounts, or has inherited wealth through a trust fund, it could make sense to protect these assets legally before you get married.

Divorce is incredibly expensive and in some cases individuals with less earning power never recover a hundred percent from a divorce depending on when they separate. Most couples getting remarried with significant assets will do a prenuptial agreement to protect their assets for their children from a previous marriage just in case things do not work out. Once burned twice shy is an old adage that estate planning attorneys like to use.

Sadly quite a few first marriages will not make it and even fewer second and third marriages survive. Make sure you hire an attorney who specializes in prenuptial agreements. You want someone who does these agreements regularly. They need to be airtight and done correctly to stand up.

While you’d probably rather be planning your honeymoon than having difficult conversations about money, being transparent and honest about how you plan to handle your finances will help you and your future spouse create a strong foundation for your marriage. There is no reason to be surprised by your financial circumstances before you tie the knot. Plan now and you will be happy that you did on that front too.

0407 Northstar 24august2011 Fred Taylor co-founded Northstar Investment Advisors, LLC in 1995. The firm specializes in managing personalized investment portfolios for individuals, families, and retirees with a focus on income generation. He is a member of the Colorado Forum and also served as an economic advisor to Colorado Governor Bill Ritter from 2008 to 2010.

In your 50s? It’s not too late to start saving for retirement

While it can seem daunting to start saving for retirement in your 50s, keep in mind, you are not alone. From paying for a child’s college tuition to taking time off work for health-related issues, there are a number of reasons why someone may not start planning for retirement until later in life.

Fifty-four percent of baby boomers have little to no savings according to the Insured Retirement Institute. If that sounds familiar, then you need to start shifting your mindset from wondering why you put off saving to thinking about what will make you the most successful in retirement. Luckily, there are multiple strategies you can employ to help get you started.

Your highest priority is to get out of debt. Entering retirement with significant debt may set you up for failure. Liquidating your debt, including your mortgage, and then remaining debt-free is one of the best moves you can make as you plan for retirement. The less debt you have, the less money you will need each month to cover your expenses.

You should also think about downsizing your home. You may still be living in the house where you raised your family. Is it too big? Does it cost too much to maintain? Are taxes too expensive? Can you live in your current home into your later retirement years? If you can, do you want to? Depending on your answers to these questions, you should consider selling and moving into a home that will allow you to still enjoy retirement but save some money as well.

Next, create a retirement budget by thinking critically about likely expenses. Don’t forget to factor in health care expenses, which may be vastly higher than you are currently experiencing. Think about what emergencies or life changes could derail your budget. Medical expenses, long-term care or the premature death of a spouse could all be potentially devastating financially. This budgeting exercise is not just about cutting expenses but also thinking realistically about your projected spending in retirement.

A common question people ask is, “how much will I need to fund my retirement?” First, ignore the “retirement calculators” on the internet. They are often not helpful and may discourage you from starting to save. Instead, think about saving in one of two ways. You can ask yourself how much you can save from your current budget and then estimate how much that money will grow over the next 15 to 20 years at a reasonable rate of return. This will give you an idea of what your financial footing will be when you start your retirement.

Next, determine how much you can spend. Estimates fall typically within the three percent to five percent range depending on how you are invested. The other way to think about it is to start by determining what you are likely to spend. After that, you can begin to calculate what you will need to save to maintain your standard of living.

Set some realistic financial goals and commit to regularly investing each month. Consistently putting money into your retirement account is a great habit. It is easier to accomplish financial goals by saving small amounts than by making a single contribution annually, and this strategy will also allow you to potentially capitalize on the ups-and-downs of the market.

Be sure to increase the amount you save each year and take advantage of your 401k if your employer offers one. After 50, you can contribute more to a 401k using the “catch up” contribution rule. The current maximum contribution is $26,000 per year. Even if you do not have access to a 401k, you can still open an IRA and “catch up” with a total annual contribution of $7,000.  

You will want to make sure you are investing wisely. Develop a reliable investment portfolio that fits with your tolerance for risk and allows you to stay invested when the market gets volatile. Now is not the time to take chances on crazy schemes or to move in-and-out of the market. Solid and reliable investments should be your guiding principles. Keep in mind there is no “magic number” you need to hit. Having some money generating additional income is better than having no money. If you are uneasy about whether you are setting realistic goals or have a strong portfolio established, call in a seasoned professional who can help you set up and monitor your investments.

It is also critical to maximize your social security or other benefits. Social security is an excellent source of income because there are cost-of-living adjustments throughout your life. You may need to work longer than planned, however, to ensure that you are fully leveraging the program. Your social security benefit is based on your best 35 years of income. Working just a little longer at a higher income tier may allow you to eliminate some of the lower-income years–increasing your overall benefit in the process.

If you have a pension, work long enough to maximize that as well. It may or may not have a cost of living adjustment, but any lifetime payment is advantageous to your long-term retirement goals. You may even want to consider working part time for a while after you retire to create a little bit more monthly income.

Ultimately, do not let the challenge of starting late on saving for retirement deter you. By setting realistic goals, concentrating on what you can control and practicing financial discipline, you can still build wealth and ensure a secure and sustainable retirement.