Money Smarts for the Real World

July 1, 2011

Celebrating Independence

With our nation's birthday a few days away, it is only fitting to focus on financial independence and steps you can take to strengthen your finances.  When your finances are strong, you have freedom to make choices that are best for you and your family.  Keeping your back "off the wall"  by fully funding an emergency fund to cover at least 6 months of living expenses is always a good start.   Paying down (or off) credit cards is also key to freeing yourself from the shackles of debt.  If you're already in a good way, make sure to protect your way of life going forward.  Do you have adequate life insurance on both spouses?  Disability insurance?  Are your wills in place?  If those bases are covered, then you are ready to ramp it up a notch.  Are you saving at least 10% of your income?  Can you afford to put away 15% to 25%?  Do you have an IRA for yourself?  Can you start up a college fund?  Have you encouraged your children to find their financial independence?  Pick an area that you have neglected and get to work.   Remember:  Make a plan and you will get there. 

Power to Your Little People

Growing up in a large family, my basic financial needs were always taken care of but as for the extras -- it was like a bakery:  "Take a number and get in line."  It annoyed me and, at times, it embarrassed me when a friend had the latest and greatest gizmo and I did not.  But, it also motivated me to find a way.


I remember getting my older brother to let me clean his room for money, I took local babysitting jobs, and the moment I was old enough to put in for my working papers, I did.  Now my first job paid peanuts, because it was a "seasonal" job and didn't have to pay minimum wage.  So for $2.75 an hour, I worked at the local pool; but I was happy as a clam, because I was earning my own dough.


When I left for college, my parents paid the lion's share and I took out the standard $2,500 government loan and paid all my expenses:  books, entertainment, clothes, etc.  A funny thing happened.  Because I had earned money in the past, I wanted to earn again, and I did not want to have to ask anyone (even my parents) for money.  So, I started tutoring for $10 an hour (nice pay raise)!  And just as I was getting comfortable and into the groove the boom was lowered:  my Dad was retiring and we were moving to Florida.  He wanted me to transfer to a state school there.  Immediately I knew I had to do something to stop this. I didn't want to leave, but what could I do?  Click here to read more and for Tips for Raising Do-it Yourself Kids. 


Finding Financial Strength in Retirement 


After working for many decades, buying a home, raising a family, sending children to college, and paying for a wedding or two, retirement probably seems like a just reward. Yet now is no time to sit on your nest egg. Even if you've been retired for several years, you need to keep planning for the future, which could extend beyond your 80s. In 2010, the average life expectancy for a U.S. citizen was 77.8 years. And if you've made it to age 70, the average rises to 87. Since many retirees can now reasonably expect to live into their eighties or nineties, retirement planning never really ends.

Of course, everyone's situation is different, but here are several areas that could have a major impact on your plans.

Investment portfolio. Most retirees tend to invest rather conservatively, and for good reason. When you're living on a fixed income, you need to make sure you have enough coming in to cover your basic expenses, and you may not have time to recover from steep market losses. Still, keeping too much of your portfolio in bonds and other comparatively safe investments may backfire over a long life span, especially if higher inflation returns. Allocating a judicious percentage of your assets to stocks may enable you to maintain your standard of living when expenses rise.

Click here to read more.



$mart Question

We are working on our budget and would like to know if there are any guidelines you can provide on spending as a percentage of the overall budget?


There are areas in your budget that may run high relative to what most people spend, and areas where your expenses may be lower than average.  Everyone's situation is different.  But, here are some percentages you should pay attention to:

  • Consumer Debt (e.g., credit cards, car loans, but not home loans) divided by your total annual gross income shouldn't exceed 30%;
  • Monthly Debt (mortgage/rent, car payment, credit cards, etc.) shouldn't exceed 36% of your gross monthly income; and
  • Housing, including taxes and insurance, shouldn't exceed more than 28% of gross monthly income.

If your percentages are wildly different from these, you should consider what you can do to get your budget more in balance, such as looking for more affordable housing, buying a car you can pay for outright, and/or consolidating your credit card debt into one lower payment, and then making a plan to pay it off in a set timeframe. 

In This Issue
Power to Your Little People
Finding Financial Strength in Retirement
$mart Question
$mart Move
$mart Move:

Help Your Kids Build a Solid Credit History



Want to teach your young adult children to use credit responsibly, without worrying about covering outrageous bills?  Consider a secured credit card, which requires a cash deposit to secure the line of credit. The amount of the deposit dictates the credit limit.  For example, a $600 deposit would enable charges up to that amount. A bill is still issued, and needs to be paid on time, but the issuer is protected in the event of default. Look for a card with a low minimum deposit, no annual fee, and a reasonable interest rate.  Most important, make sure the card reports payment history to the three largest credit bureaus so credit history can be established.  Cardhub.com, a credit card comparison site, likes Orchard Bank Secured MasterCard based on the criteria listed above.


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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.
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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

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