Answers to Ask the Experts “Setting Financial Goals” Featuring Wise Bread
This past Wednesday, January 14th, we asked you to submit your questions on how to set financial goals, and the response was great. This week’s expert, Meg Favreau, Senior Editor of Wise Bread and frequent contributor to Huffington Post and US News & World Report, shared her knowledge and expert advice to help our fans become debt free and financially secured.
Be sure to visit us next Wednesday and come prepared with your questions for our next topic: “Balancing your Budget.”
Q&A: Setting Financial Goals
I make little money; most of it goes to rent. What’s a strategy for setting cash aside and leaving more room for other use?
There’s a concept in personal finance called “pay yourself first,” and it refers to putting aside savings for yourself before you ever have a chance to spend it. There are several different ways you can do this — if your company offers a 401(k) plan, sign up for it; it automatically puts money you earned into retirement savings before you ever have a chance to spend it. You can also set up your direct deposit to automatically put some of your paycheck in checking and some in savings, or set up an automatic savings plan with your bank that automatically moves money from your checking account to your savings account on your payday.
Hi! I am in my early 20s and am looking to set some money aside into a money market account to let it grow for the future. I would like to save around $1000 for my initial deposit, but don’t want to have my social/food fanatic life to go on the back burner because of it. Can you offer some crafty suggestions regarding saving some extra cash while still having a good time? Thanks!
Totally! There are so many inexpensive ways to have fun with friends and enjoy good food, like hosting game nights and potlucks, going on hikes, and checking out events like First Friday (when art galleries stay open late and offer free food and drinks). It’s also important to leave a little money in your budget so you can get drinks in a bar or eat out at a restaurant a few times a month if that’s important to you — you’re much less likely to break your budget if you give yourself some money for discretionary spending.
Related article: http://www.wisebread.com/47-cheap-fun-things-to-do-this-weekend
How can one save money while in the grasp of a title/payday loan? I feel like whatever money I throw at it is just wasted. It is a constant strain on my wallet and it destroys my budget. Do you have any tips for handling these types of loans? I’m to the point where I just want to ignore it and pay the price when the day comes. It is far too stressful to deal with these people on a weekly basis.
It sounds like you’ve already done the most important thing — decide you’re never going to take a payday loan again. I know it can be difficult, but do whatever you can to pay the loan off as soon as possible, such as picking up a side job to earn extra money, or, if you get a tax refund, putting that towards paying off the loan. Also, if you think your payday loan lender might be doing something illegal, contact the Consumer Finance Protection Bureau at consumerfinance.com/complaint — they can help you out.
Related article: http://www.wisebread.com/30-great-side-jobs
I’m in my late 20′s and need some help setting financial goals. I do not have a retirement plan but my work offers a 401k with matching contributions, should I start and how much should I contribute? I also still have some small loans and some credit card debt with little savings, what should I approach first to get in better financial position? Is there a good website or service that will teach me more about how to deal with my personal finances?
First, make sure you have a small emergency fund — $1,000 is a great place to start. Otherwise, if you have an emergency, you could get into even more debt. Next, contribute to your 401(k) — your employer’s matching contribution is a huge benefit. Finally, work on paying off your loans, starting with the loan with the highest interest rate — you can also ask your lenders if they’d be willing to work with you to lower your interest rates (it never hurts to ask), or you can consider transferring your credit card debt to a 0% balance transfer card (but only do that if you’ll be able to pay off the balance before the promotional 0% interest rate ends). As for a website to learn how to deal with your personal finances…well, we’d humbly suggest Wise Bread.
Related article: http://www.wisebread.com
I am divorced and 58 years old. I haven’t even started to think about retirement. What are some ways I can start even at such a late time in my life. I would like to be able to put a little bit away. I realize that starting this late might be difficult but I figure anything is better than nothing. So any ideas you have would be great.
If you work at an employer with a 401(k) or 403(b) plan, start using it, contributing as much as you can. In fact, when you’re over 50, the legal limit for how much you can contribute is raised. If you don’t have a plan like this available, open an IRA. Even though you’re starting late, every little bit you contribute can help. Finally, look for areas in your life where you can downsize, such as your house or car. Not only will you be able to save more money now, but you’ll also need less money in the long run.
Since I don’t have a 401k plan or anything set up for retirement, I’d like to start investing. I’m torn between a Roth IRA, a CD, or stocks. Is one better, or should I aim to put some money towards each?
I’d pick the Roth IRA to start. It lets you take advantage of the magic of compound interest. The interest you earn then earns more interest and so on — that’s how your nest egg really grows. If you’ve contributed the maximum you can to the Roth IRA, then I’d look to investing in stocks.
Related article: http://www.wisebread.com/7-surprising-facts-about-roth-iras
How much money should a parent realistically put aside each month in order to get a good college fund going for their children? Is there a certain percentage of the income or a flat amount? Should I factor in whether I think my child will want to stay in state or out of state?
As I’m sure you know, college costs can vary wildly; depending on your income and whether you’re saving for in-state public school or a private school, experts recommend saving anywhere from $140 to over $500 a month — and that’s if you’re starting when your child is an infant. I recommend taking some time to think about what you want to be able to provide your child. For example, some parents will save for in-state tuition and require their children to help make up the difference if they want to go elsewhere.
Many of us set financial goals in January and then forget those goals in a few weeks. What is a good way to remind ourselves of our goals throughout the year, and to keep ourselves accountable?
If you’re trying to make several financial changes over the course of the year, try taking on one habit at a time. Then, when that habit becomes part of your regular routine, add a new habit. If you have a specific savings goal you’re trying to meet, I recommend using Mint.com and adding your goal in the site’s Goals section — it will help track your progress and let you know when you’re off-track.
Related article: http://www.wisebread.com/5-ways-to-keep-your-new-years-resolutions
What are some simple but effective financial goals for someone graduate college? How should prioritize paying back student loans while saving both for the future and for emergencies that might happen at any moment? Thanks for the help.
Your first priority should be to build an emergency fund — $1,000 to start, and then one month’s worth of expenses is a good goal after that. Next, if your employer offers a 401(k) match, contribute to that — it’s free money. Then, if you have extra space in your budget, work on paying extra on your student loans each month. The more you pay now, the less you’ll have to pay in interest over the life of the loan.
Related article: http://www.wisebread.com/15-ways-to-pay-back-student-loans-faster
What are the things to prioritize in my financial budgeting for 2014? How much money should I allocate for health goals? How much should I allot for investments? How much should I spend on insurances and pension plans?
It’s difficult to know the answer to this one without knowing the specifics of your budget and goals. You can never go wrong by saving for retirement and bolstering your emergency fund. And make sure you budget some money for personal goals and things you enjoy — that way, your budget won’t feel too tight.
What’s a good strategy for managing my income when I want to both a) save more & b) pay down more of my credit card each month?
Use tools that help you visualize exactly how well you’re doing with both saving and paying down debt. Mint.com is my favorite for budgeting, and you can easily track how you’re doing with your goals each month. SaveUp.com is also great — not only do they help you track your financial goals, but every time you save, you earn credits that can be used to play for real prizes.
We’re a young couple looking forward to purchasing our first home. We have decent credit, but no experience with long term savings or home loans. How can we work towards this financial goal?
Congratulations! The first step is to figure out what you can afford — for tips on that, check out the article below. Then, save as much as possible for a down payment before purchasing; 20% is ideal. And remember, how much home you can afford is not necessarily the same thing as how much home you need. If you can get away with a smaller house, do it — it’ll be easier to take care of and cost you less in the long run.