How can I increase my savings rate?
To increase savings rate you can either spend less or earn more. It sounds simple, but in practice it can be much harder.
Savings rate (percentage of income you save) depends on your free cash flow… how much is left after paying for everything.
Expenses are either fixed, variable, or discretionary. Fixed are hard to change and typically are necessities, variable expenses have a bit more flexibility… maybe you can find cheaper alternatives and spend less for the same things. Discretionary expenses are a whole different story. You can live without these expense but choose not to.
Put together a statement of cash flow to get the “big picture” and cut back where possible… or at least where you are willing. If you cut back on spending you can increase you savings by the same amount.
Can you take on a part time job? Do you have any marketable skill that people will pay you for? Can you get paid to work from home?
Any increase in income is an increase in savings.
Should I fund an education account for my children or fund my retirement account?
You can borrow money for education… you cannot for retirement.
Get a retirement plan in place and then look at what can be saved towards college planning.
With a good plan you can see the big picture… you can see how your goals are developing… you can see where to direct savings for short-term, intermediate-term, and long-term financial goals.
A good plan will help you avoid costly mistake that cannot be undone. With a good plan you’ll be surprised just how quick you can tackle both of these goals.
Should I go back to college?
Investing in yourself is a good idea and usually comes with great returns.
If you work in a profession that pays substantially more with an advanced degree, going back to school can be the right choice. It’s important to analyze the expense of school versus the income rewards before moving forward.
A quick search on the web can give you some basic numbers to work with. Start with the median incomes in your local area for any new position(s) you can get with an advanced degree.
If employed, reach out to your current HR department. Ask if they have a program to help pay for your education. What opportunities do they offer after completing an advanced degree?
Look for subtle trends. Is the field your pursuing growing in number of jobs or is it shrinking?
Some careers can offer great rewards by acquiring new skills outside of an advanced degree track. Does yours? Maybe a Certificate Program is a better payoff choice.
There are many other variable to consider that cannot be covered here. Are you married? Do you have children? Will you work full-time while going back to school?
Weigh all of these factors before making the jump.
When should I take social security?
That depends on your circumstances. Factors change if you’re married, if you’re still working while taking benefits, or when you were born.
Social Securitie’s definition of full retirement depends on you date of birth. If you were born in 1937 or earlier it’s age 65. Birth years between 1938 to 1942 target full retirement on a sliding scale. Birth years 1943 through 1954 is 66. 1955 to 1959 is another sliding scale and anytime after 1960 it age 67 see full chart here .
Waiting until full retirement before taking social security benefits is typically the better option unless other circumstances prove otherwise.
Taking benefits before full retirement and still working can reduce your benefits. Here are the Social Security rules for taking benefits while working.
If you do not need the money when you reach full retirement age, waiting until age 70 increases your monthly benefits. See how Social Security calculates increasing your retirement benefits for delaying payout.
Calculating when to take retirement benefits can be overwhelming and many options to maximize social security benefits exist. The problem is if one of these strategies are done wrong they can end up hurting you instead of helping you.
If your answer is not simple then seek the advice of a CERTIFIED FINANCIAL PLANNER™ or other financial professional to weigh the pros and cons of your situation.
I do not have millions of dollars, do I need an estate plan?
For most everyone Estate Planning is a necessity.
Strategies for protecting family interests must be determined and recorded prior to the event.
At the least, you need a simple Will, Advanced Directive, and Power of Attorney. These help eliminate questions and ease emotional stress in the midst of a crisis.
If you have children, and no guardianship provisions, it can create chaos for your surviving children and other family members.
More advanced plan use Trusts to transfer wealth outside of probate and give donors control even after death.
Don’t brush this part of your financial plan off as “not needed”.