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Money Smarts for the Real World | June 25, 2011 |
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Making the Most of Summertime
The relaxed pace of summer is an opportunity to get to all the things that get put off because we are busy running around. With fewer extracurricular activities for the kids and more leisure time, make sure to set aside some time to take stock of your goals and ways you can improve your situation. Maybe you need to save more, maybe you need to assess your investments and whether they serve your needs, and maybe you want your kids to get money wise. Whatever your concerns are, this issue of $mart Talk is chock-full of ideas for you to act on. Put some time in up front, be specific about your goals and truly enjoy the summer knowing you have moved one step closer to the financial security you seek. |
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Keeping a Cool Head Can Mean Money
You've heard it before: Don't let emotions get in the way of business. Well the adage holds true for investing, as well - probably even more so. It seems easy enough to do, but when you see the value of your savings falling like a botched Martha Stewart souffl�, your first instinct may be to sell, sell sell! But acting out of emotion can often be the worst thing you could do when it comes to investing. Here are some tips to prevent sabotaging your financial well-being.
- Make sure you have a specific financial goal (or goals) with a specific time frame in mind. Sounds pretty basic, right? It may be, but the trick is to really give this some serious thought. Very rarely are you saving for just one thing at a time. Most of us are saving for retirement, future college costs, and near-term goals like buying a new car or house, a home remodeling project, or planning a big vacation. The way you invest for a short-term goal is very different from the strategies you would use to meet a goal that may be 30 years away, like retirement. Long-term goals require growth provided from stocks (equities), because you will need the money to outpace inflation. If you put your retirement savings into CDs, after thirty years, your investment would be worth less than what you put in because inflation would have reduced its purchasing power. Short-term goals require stability, because you plan on using the money soon. If the stock market has a set-back, you can loose a substantial amount of your investment in an eye-blink. Therefore, CDs, money market, or even short-term bonds would be a good choice for a shorter investment time frame. When I hear people say they want to make as much money as fast as they can - they need to know the reality is that the inverse holds true for that investment, as well. If an investment can move up in value rapidly, it is volatile and it could just as easily (and swiftly) move in the opposite direction.
- Diversify your investments. Yes, stocks are for growth and bonds, money markets and CDs are for income, but having a mix of investments can really protect your investments from times when the stock market may be volatile, or times when rates on CDs or money markets are anemic. Alternative investments, as a group might be risky, but when added to a portfolio (and combined in very specific percentages) can actually reduce a portfolio's overall volatility. Click here to read more.
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Finding Financial Strength
I love the lazy days of summer. It's nice to have more free time and spontaneity. But, sometimes too much of a good thing can be bad. Sometimes, without the strict schedule we normally operate under, very little gets done and we find ourselves wondering where the time went. That is why it is important to set goals, to write them down, and to even share them with others. Accountability kills procrastination.
This summer, make a commitment to advance your family financially. If you don't have a budget in place, sit down and work one out with your family. If you don't have an emergency fund (or it is under-funded), make a plan to regularly contribute to it. If you do not have an IRA for yourself, start one up. Take a few steps today, and add to them as you go. That is the only way to improve your situation. Even if things aren't tight, we can always find ways to improve and to make the most of our resources. Make this a goal this summer, and you will feel the benefits long after the summer sun has set. Don't forget to involve the children in age-appropriate ways for lessons that will last them a lifetime. Here are some ways to make the most of summer; remember to write down your goals and make them very specific so you can measure your progress:
- track expenses and create a budget or fine-tune your budget, if you have one;
- identify budget-busters and find ways to eliminate/reduce these expenses (e.g., car payments, utility bills);
- create (or add to) your emergency fund;
- make a plan to reduce credit card debt (look for lower rates, pay off more than the minimum);
- explore ideas to increase income (start-up a home business, consult, or explore new job opportunities);
- start saving for retirement or add to your savings;
- work toward saving 10% to 20% of your household income, or more if you can;
- start a college savings plan or add to it;
- if your kids have summer jobs, encourage them to start a Roth IRA to secure their financial future (click here to see the benefits);
- even younger kids can share in this experience: Show them how much you have allocated to spend at the grocery store or on back-to-school clothes, and allow them to help choose items to stay on budget. This simple act will sharpen their math skills, and create financial awareness.
Keep the children involved, by measuring the results of your efforts along the way and sharing your progress. Let this be the summer that didn't get away and you will breathe easier the rest of the year!
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$mart Question
We keep trying to put together a budget, but our income isn't the same week to week. Do you have any suggestions for us?
It definitely is a challenge to allocate what you earn when that amount varies, but that is why it is even more important to have a budget in place.
Here's a starting point: write down all your expenses that you incur every month (rent/mortgage, utilities, taxes, phone, cable, cars, insurance, and food), and then look at this amount relative to the lowest amount of income you earn in a "bad" month. Is this lowest salary enough to cover all these expenses? If not, what is the difference? How much will you need to make up in order to cover all the bills? On those months where your income is greater, you will put aside the extra amount. This will become a kitty to tap on those months you need it. Once you have built up a two month reserve, you can then contribute any extra income into your Emergency Fund to give yourself another added level of protection. |
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$mart Move:
'Tis the Season to Get Started
Why wait until to December to worry about how you will afford the holidays? If you budget now and start socking away small amounts of money, the credit card bills won't land on you in January, leaving you with more post-holiday "weight". Here are some tips to help you get a jump on the holiday frenzy:
- Make a realistic budget and record what you are spending every step of the way so that you stay within your means.
- Don't forget to include the costs of any travel, hosting, or decorations that might add to your expenses.
- Don't wait too long to book your travel reservations to ensure a good fare.
- Pick up gifts now when you are not pressed to shop for that entire list all at once.
- It is a great time of year to shop websites that may have their holiday decor items greatly reduced.
- Remember to stay organized and keep track of what you have bought (and where you are hiding it) so come December you don't end up buying duplicate gifts.
A little planning now can make the holidays more affordable and less stressful. That's probably the best holiday gift you can give yourself.
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Have an Event? | Real$martica, Inc. is available to hold workshops for PTAs, local organizations, schools, and other groups and associations. Topics include basic personal finance (handling money, using a budget, credit issues, and saving) to more complex issues such as buying versus renting; investing for retirement; managing the college selection, funding and financial aid processes; and estate issues. Real$martica is also available for one-on-one consultations. Contact us for more information. |
Contact Us |
Thank you for subscribing to our newsletter. We hope you found it informative. Our mission is to provide you with timely information that you can put to use. We want to address your needs and hope you will provide us with your questions, comments, and feedback so we can make this publication and our website a meaningful resource for you and your family.
Dina Isola, President
dina@realsmartica.com 631.675.1420
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| Offer Expires: July 16, 2011 |
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