Blueprint for the Financial Planning Tower

The idea for the tower came as I started my financial planning firm. I began sharing with my friends my newfound career shift from stay-at-home-mom. I would say “I’m a financial planner” and they would respond, “Oh, so you sell insurance.”

No, no, no. That wasn’t right at all. I had to find a way to explain what financial planning was. So I began reading, researching and drawing.

Armed with background information from the likes of the Bible, the Certified Financial PlannerTM board, and lots of books and online searches, this idea came to me. Every financial group seemed to have a pyramid type shape, which seemed  to be a good place to start. The images I found were very focused on investing, which is only a piece of the puzzle, and I wanted to cover all aspects of financial planning. 

Two other pyramid shaped concepts came to mind. First, Abraham Maslow’s hierarchy of needs which explains how humans are motivated. Second was the Food Pyramid. I know that is now passé, but it still seemed an appropriate metaphor.

Should I call it a pyramid? Nope – sounds too much like Bernie Madoff and a pyramid scheme where people lose money. A tower sounds better. Towers are strong and sturdy and something to be proud of when complete. After much introspection (because that’s what introverts do) I developed the concept of a Financial Tower.

Level 1 – Financial Planning Tower Basics

Maslow’s hierarchy of needs begins with Physiological needs. Humans cannot really grow beyond this level until these needs are met. For example, if you are hungry, it’s difficult to focus on taking care of your children. You have to meet this basic need first.

Similarly, grains at the base of the Food Pyramid were thought to be the foundation for a solid diet.

Your budget is the foundation for all of your financial planning and makes up Level 1 of Your Financial Planning Tower.

Income

The base level of the tower begins with your Income. Remember when you were a kid and your mom gave you an allowance? Or maybe your grandmother gave you some money for your birthday. Maybe you earned money for babysitting or lawn work. Regardless of where it comes from, income is where everyone’s budget begins.

Expenses

Next comes your Expenses. Once you have some income, you’ll want to spend it. Notice that your expenses block is smaller than your income block. When your expenses are less than your income, you’ll have money to set aside in savings for an Emergency Fund. 

Emergency Fund

Your Emergency Fund is a critical corner of support for your Financial Planning Tower. Not only does this savings allow you to have money for unexpected events, it builds the habit of setting aside money. It trains you to save for a rainy day. Conventional wisdom says to have between 3 to 6 months worth of expenses in savings, but that number may be more or less, depending on other factors. Your job security, amount of debt, income, and other investment resources also factor into the right amount.

Notice that if you don’t have this block of your tower complete, the pieces above it are likely to fall.

Level 1 is the place where everyone starts budgeting. Just like Maslow’s concept of your Physiological needs, you have to have a budget first. If you have never created a budget, you still have one, it’s just dysfunctional. 

Just like the complex carbohydrates this level represents, your budget provides lots of energy, but little nutrition. It’s essential to your needs and always in motion, but doesn’t really grow your overall wealth unless you use it wisely.

As a planner, I want to be sure your budget works.

Level 2 – Financial Planning Tower Safety Needs

Maslow’s second level is Safety. Until this need is satisfied, more or less, we can move to the next level. In  financial planning terms, this level of Your Financial Planning Tower is critical. Your safety needs protect the things you have and people you love, providing a strong second level for your tower. Financial planning around risk solves everyday problems.

Fruits and Vegetables

Families need more savings for specific spending items. You know when you need new tires on the car? You may not want to purchase them, but it certainly feels better to use money that you have instead of putting them on the credit card to pay another day. That’s why these extra savings categories are fruits. Everyone loves fruit.

We also need insurance and estate planning. These are your vegetables because nobody likes them, but you have to have them because they are good for you. 

Operations and Maintenance Funds

The first block is your Operations and Maintenance Funds. (By the way – if anyone comes up with a better name, please let me know!)

Anytime you own something that’s very large, you will have to take care of it. And that costs money. The three main things you need to maintain are:

• Home
• Cars / Vehicles
• Health

There will be times in life when you will need money to pay large expenses. For example, you may need a new roof for your home. Or you may need tires for your car. Maybe you need to meet a large medical deductible. These expenses are not in your normal budget. You should set aside money so that when they happen, you’ll be able to pay for them without having to dip into credit. 

Long Term Goals

Often we have specific goals we want to fund. For example, maybe you are saving for a trip to Europe, a wedding, or you are looking to buy a new car within the next few years. These are goals that you can budget and save for on a regular monthly basis.

That trip to Europe for the family may cost $10K. So, if you save a regular amount each month, plus any bonuses you may receive, you may decide that you can take that trip in about two years. That’s a powerful goal that the whole family can get behind!

Insurance

Managing risk helps protect from catastrophic hazards that could bankrupt your financial plan. Insurance provides a means to protect your family if you pass away. And it replaces your income incase you cannot work.

When planning, you will want to look at your health and property needs to protect your larger assets.

Reviewing your life insurance and disability insurance are a means of protecting your income. I’ve seen lots of plans with too little in disability and too much in life insurance. 

Long-term care is a category unto itself. You may or may not need this type of insurance, but it may be difficult to make this decision without some additional expertise.

A proper needs analysis will help you decide the right amount of insurance as well as the right type of policy to purchase.

Estate Planning

Estate planning is not just a concept for rich people. It’s the surest way to protect your family if you aren’t there.

Estate planning is the only place that you can designate someone to be the guardian of your children or manage funds if you’re incapacitated. You do not want to leave these decisions to the laws of  your state.

This is not just a need for when you die – it’s also for while you are alive. If you are incapacitated, you want to be sure you have the right people making your health and financial decisions.

As our dependence on technology grows, your digital accounts need attention. Uncle Ben may be a great executor when dealing with accounting paperwork, but Cousin Zach might be the best choice to manage your Facebook and Twitter accounts when you are not here.

Having instructions like these gives you the peace of mind you need to move to the next level.

Level 3 – Financial Planning Tower and Investing

Now that your first two levels are set, we move up to the fun stuff that everyone wants to talk about – retirement and investments. This is the traditional venue for financial planning.

Level 3 of the Financial Planning Tower is equivalent to Maslow’s Love and Belonging level. This is where we develop our sense of belonging and really begin to feel good about ourselves and others. The Food Pyramid expresses this level as Dairy and Meats. It’s much richer up here!

Retirement Funding

Everyone loves to talk about how well their 401(k) is doing when the market is up, and how terrible things are when markets are down. The top questions that I get revolve around when, where and how much is needed to retire.

Personally, I believe the government has made it extremely difficult for working families to save for retirement. It’s too complex! People have gazillions of questions about IRAs, Roth IRAs, 401(k)s and other retirement plans. Pension plans also get their fair share of concern. These plans are more common than you may think. In addition to teachers, police, firefighters and other state employees, many companies still offer pensions to employees.

And don’t get me started on Social Security, except to say that yes, I believe it will be there when you retire. 

Education Funding

Families look out for their children, so college saving runs a close second to retirement in terms of major goals. Unfortunately, we often wait too long to begin addressing this item, so parents seem panicked when they realize they only have two years to save.

When considering college, parents have many questions including:

• what is the viability of the student loan system?
• how do we effectively save?
• what is a 529 Plan and how does it work?
• can we afford the rising rate of education?

The rules around college often change with a new Presidential administration. We also need to consider if our children are ready for a four-years program. They may be better suited for two-year college, an apprenticeship or waiting and attending later. There are so many variables to address it can be overwhelming without some help.

Level 4 – Financial Planning Tower and Your Passion

Now that these three levels are covered, we move into what Maslow would call Esteem. Just like our body fat, our Esteem keeps us warm and happy. Level 4 of Your Financial Tower is your passion. While it is not directly related to money, this level is an emotional driver for all our goals.

We need to feel good about what we are doing in our life. We can be happy being an engineer, housewife, accountant, food server, or any number of careers, but often we are not. That may be because we haven’t done a good job building our tower. When we have not met our “deficiency needs”, as Maslow says, we have a difficult time being motivated.

When we are misspending and not saving, we always feel like we are behind the 8-ball. We feel like we can’t leave a job where we are unhappy because we have bills to pay and mouths to feed. We may feel trapped in a role that isn’t fulfilling because it doesn’t use our God given talents.

This is a time to rethink our purpose, maybe change old habits, and set new financial goals so we can shift from a job as an accountant to a passion of horse training. Or a food server to a bakery owner. Or a housewife to a financial planner.

Level 5 – Financial Planning Tower and Your Legacy

Level 5 of Your Financial Planning Tower is your Legacy. For us, that means our legacy – like Maslow’s self-actualization or the sugar on top. These are the things we leave behind.

This doesn’t necessarily mean the money we leave, although that is part of it. We’ve all heard the horror stories of debt-ridden people with nothing left for the kids. Families are then left to fight over the teapot.

Our legacy is truly how we are remembered when we are gone. Do you want to be remembered as someone who didn’t have much money, but was a great photographer who shared his work with everyone? Or would you rather be remembered as an overworked executive who didn’t have time for the kids?

Our legacy often has very little to do with our money.

In the Basement of the Financial Planning Tower

Now, if you look at Maslow’s tower, or the food pyramid, you’ll notice that that’s all there is. A few levels that build a triangle shape. However, in finance, we still have to deal with our debt.

I really had to think about this one, since there was no other comparable concept within the models I had. So I looked at my tower and decided that debt is just spending more money than we have, so it had to be an expense. But it couldn’t go up, so it had to go underneath our expenses. And down, and down.

Then, I thought what would it be like if we didn’t get the emotional support we need? And what if we didn’t get the food we need to survive? Well, that would be starvation, and that’s exactly what debt is.

When you continue to borrow money, your income goes to pay for expenses you couldn’t afford in the first place. You can never build your tower up because you are always busy filling in that hole. Debt robs us of the funds we need to build our tower, so we have to use it prudently and keep it under control. 

Construct Your Financial Planning Tower

After years of planning and telling the story of your Financial Planning Tower, I have seen it positively impact others. People often tell me that they never thought of planning that way, or that the image made so much sense to them.

Pathfinder Planning uses the Financial Planning Tower to help working families find gaps in their finances, fill them in, and continue building. Here are some examples of the successes our clients have had:

• Paid off $100K in debt
• Had disability insurance in place before a skiing accident
• Completed estate planning to accommodate an adult special needs child
• Rebalanced retirement accounts resulting in reduced investment fees and increased return projections
• Savings to support their family when the breadwinner lost their job during COVID
• Bought a second home
• Changed from a job to a dream before age 50

We understand how difficult it can be to address all your competing needs at once. The Financial Planning Tower gives you the structure you need to prioritize and achieve your goals. These concepts can and do work for our clients! They can work for you as well.

Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. We serve young adults and working families by providing personal financial planning and asset management for a simple fee. www.pathfinderplanningllc.com

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Organizing Your Finances

2020 was a hot mess. Given that, you may be thinking about getting better organized in the new year. Your money is no different. Organizing your finances now will set you on the right track for the rest of the year.

How do you decide when and where to spend your money? Do you use a rational, well thought-out process? Is every dollar accounted for? Or do you just throw caution into the wind and go with what feels right?

Organize with Your Head or Heart

If you’re like most people, you probably do a little of both. Consider this: just about any decision that you’ve ever made likely falls under one of two categories. It is a logical decision backed up with emotion, or an emotional decision backed up with logic.

This means that you either make decisions primarily with your head or your heart. When organizing your finances, you need a lot of logic as well as some emotion.

Emotions are going to influence your decision making process no matter what. That’s just a part of life. The key is knowing how to identify those emotions. Then you determine how to effectively use them when evaluating financial decisions.

Let’s take a look at the head vs. heart dilemma in more detail and find a way to balance the two. This will help as you begin to organize your budget, savings and investments.

How Emotions Affect Your Organization

Our emotions are closely intertwined with our finances. There is really no way to keep them separate. Our choices are largely influenced by our emotional state. And our financial situation can have a huge impact on how we feel.

A perfect example of this is what happens when you have a bad day at work. Instead of coming to grips with the fact that bad days are normal, you head to Amazon in search of retail therapy.

According to a study published in the journal of Psychological Science by Harvard and Columbia University professors: people who are sad are willing to forgo greater future monetary gains in exchange for instant financial gratification. While I am just your Financial Mom — and not a noted Ivy League scholar — I can tell you with 100% certainty that by allowing an emotion to drive your financial decisions, you will end in debt and despair.

Buying something “new and shiny” gives us a temporary endorphin boost. But spending to numb stress away is never a good idea and does not help to organize your finances. A better financial move is to recognize the triggers that cause the stress that makes you want to shop. When you take the time to properly identify the cause of the stress, you are more likely to find a solution that doesn’t involve the swiping of your credit card.

How Logic Affects Your Organization

According to online educational resource, Boundless.com: Rational decision making is a multi-step process for making choices between alternatives. The process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight.

However, as we discussed earlier, making financial decisions independent of emotion is something that cannot really be controlled.

With this being the case, the logical response is to figure out how you can make better financial decisions regardless of your emotional state. Here are a few tips to help you channel your logical side when navigating these situations.

• Have a plan: From grocery shopping to retirement planning, it is important that you have a strategic plan for the uncertainties of life. Organizing your finances before emotions become a factor improves your chances of successful execution.
• Acknowledge your emotions: No matter how logical of a thinker you believe yourself to be, you need to acknowledge your emotions. This allows you the opportunity to think your way through decisions.
• Don’t stress about things you cannot control: We often stress about things that we cannot control. In order to overcome these feelings, you must learn to accept that there are some things that you cannot change and move on! Spending time obsessing over things out of your control won’t change the outcome.
• Sleep on it: When you’ve settled on a decision, don’t act immediately — instead, allow yourself a predetermined amount of time to reflect on it. This ‘grace period’ usually results in greater clarity and will either reinforce your decision or cause you to re-evaluate.
• Revisit your goals: Going back to the first point about having a plan. Always remain cognizant of the goal you are trying to reach. This is the reason you’re investing, saving, or paying down debt in the first place. Compare your final decision to your goals. How will the choice you are about to make affect the probability of achieving that goal? The answer will help you determine whether or not it is a logical option.

When I’m faced with a decision, I try to ask myself: What does your head say? And then I ask: What does your heart say? If they are in agreement, then it’s probably a good decision. If they are at odds, I try to go with my head. Common sense and rationality always seem to help me make good money decisions.

A good head and a good heart are always a formidable combination – Nelson Mandela

Now You Can Organize

Once you understand the “head vs. heart” debate, you can begin to organize your finances. Start by listing all of your checking, savings and retirement accounts. Then list other items you  own, such as a car or home. Now, list all of your debts. This includes a mortgage, credit cards and student loans.

Now think about how each of these accounts make you feel. For example, look at your savings account. Are you concerned that the balance is too low? That is an emotional response. Let’s turn this into a logical response. Change your thinking to: “Wow – I only have six weeks of emergency funds.” Instead of worrying about a low balance, you can now create an action plan to increase your savings.

Marie Kondo is an organization master! She wants you to find joy in the things you have. Organizing your accounts will help you budget better, set goals and then feel good about the work you have done.

How to Organize Your Finances

Pathfinder Planning offers a great way to arrange your accounts all in one place. You can Get Organized when you log in to Advizr, our planning software, and link your accounts online. Then, you can see everything in one place and keep track of your balances on a daily basis.

Recognizing your spending triggers is the key to understanding why we make the financial decisions we do. So the next time your head and heart are in conflict, go with the logical decision and trust that your heart will eventually fall into place. It might not be easy, but over time you will find it easier to make rational decisions — independent of your state of emotions.

Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.

Your Financial Mom blog posts are not meant to be legal, accounting or other professional service advice. Content represents the opinion of the author only. Pathfinder Planning LLC is not responsible for the accuracy or validity of content contained in third-party comments.

The post How to Get Organized in 2021 appeared first on Pathfinder Planning.

Having a digital executor to manager all your online accounts when you pass can make life simpler for your family. Let’s find out how.

Mary, a mother of four and grandmother of nine, passed away. She thought she had all her estate planning in order. She had created her health care and power of attorney documentation, so her family was able to take care of her in the hospital. Her will was set up so her children would know what to do with her home, bank accounts. She even had directions for the cherished family clock. She even had directions for her pet, Snowball the cat.

The problem came later when Mary’s Facebook profile announced her birthday. No one had thought to address her online social media account. Her children were split – do we close it down as it’s too painful to see each year? Or do we leave it open as a memorial to our Mom?

With our aging, but technologically savvy population, these questions will begin to crop up for baby boomers and others who pass away. To avoid issues similar to what Mary’s family faced, it’s important to consider what happens to your digital assets once you’re gone and establish a Digital Executor to act according to your wishes. 

Start by Taking Inventory

Before naming a Digital Executor, estate planning experts suggest creating an inventory of your digital files and online accounts, along with the corresponding usernames, passwords, and answers to any security questions that may be required for two-factor authentication. 

The easiest way to begin is with a list of your devices (i.e., cell phones, tablets, laptops, desktop computers. You will want to make sure that you both identify the device and write down their individual login credentials. Be sure to record passwords for any apps within those devices that may require additional authentication as well. 

From there, you will move on to inventory the other electronic records you currently use, own or control.

Here are a few categories to consider:

• Email accounts (Gmail, Yahoo, work email).
• Social media (Facebook, Twitter, LinkedIn, Instagram).
• Storage and file sharing (Google Drive, Dropbox).
• Payment programs (PayPal, Venmo).
• Shopping services (Amazon, Target, eBay).
• Websites and online businesses (domain name registrars, hosting services).
• Video services (Netflix, Disney+, Hulu).
• Music services (Pandora, Spotify).
• Books (Kindle, Audible).
• Virtual currency (bitcoin, etc).

Some Things May Be Easier to Pass Down than Others

While it’s important to make note of your entire digital asset library, some assets that can’t be passed down. For example, in many cases when you buy a book or song online, you’re buying a license that is only valid during your lifetime. However, if those books or songs were purchased using a family account, they can be shared with your heirs both now and after you’re gone.

A similar thing happens with airline miles. 

In the terms and conditions of many frequent flyer programs, it is stated that rewards aren’t your property. And while this may be the case, many airlines will allow for the transfer of frequent flyer miles to the appropriate heirs provided documentation.

When it comes to the large, internet-based companies like Amazon and Google, some allow you to designate someone to handle your account when you die, while others simply close or deactivate accounts when they learn of a death. 

If you’re curious about which company does what, a quick Google search of the company name along with the phrase “what happens to my account when I die” can certainly point you in the right direction.

Once you decide what you want to happen with each type of account or digital asset, write down your wishes. You can leave these instructions and the relevant login credentials in a letter, stored with your other estate planning documents, that can be given to the person you want to carry out those wishes.

Appointing a Digital Executor

Consider the right person for this job. This may or may not be the same person who is responsible for settling your estate. Someone who is good at paperwork and deadlines may not have the patience or skillset to close down your Instagram and Amazon accounts or make copies of all those pictures on your phone.

North and South Carolina, among other states, have enacted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). The RUFADAA helps address access to online accounts when a person dies or loses the ability to manage their accounts. These rules apply to digital property such as computer files, web domains and virtual currency. However, it restricts access to communications such as email, texts and social media accounts.

So how do you deal with all those social media accounts? Facebook allows you to delete an account after death, or memorialize the account by appointing a Legacy Contact. This person is responsible for maintaining the page.

Twitter can delete an account, but if you don’t have all the person’s information, their team will work with the person authorized to act on behalf of the estate, or a family member. 

Google has a service that allows you to decide ahead of time who can access what information on your account. 

Take time to make a list of all your online accounts and to communicate that information to your family. Using a password manager is a huge help in this area. Let them know what you want them to do.

In Mary’s case, her family has decided to leave her Facebook profile open and her oldest grandson is managing the account. Her family and friends often post memories and scan in old photos to share with the family so they continue to remember her in the most positive way. 

Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. For more information, visit www.pathfinderplanningllc.com. 

The post You May Have a Will, But Do You Have a Digital Executor appeared first on Pathfinder Planning.

Every day my morning starts with a news update followed by targeted financial headlines and then financial planning updates. Information is moving so fast, it’s hard to keep up.

Most recently, the government has passed multiple legislative acts to help American workers and small businesses during this unprecedented time. With that in mind, here is an overview of the relief that your family can expect as part of the CARES Act and other recent legislation.

As a bonus, we have a printable checklist for you as well!

Tax Relief

With the advent of the CARES Act, the government has made updates for taxpayers by providing rebates, additional credits, and upgraded deductions.

First, taxpayers who filed in 2018 or 2019 will receive a one-time emergency cash payment of $1200 per person, or $2400 per married couple filing jointly. Additionally, taxpayers will receive an additional $500 for each child under age 17. There are income limitations, so not everyone will receive a payment.

While this money is not a non-taxable credit, taxpayers who have a large increase in their adjusted gross income in 2020 may need to pay back some or all of their money next tax season.

If you haven’t received your money yet, check the IRS website for your status. 

The Federal tax filing deadline for 2019 has been moved from April 15 to July 15, 2020, so you have extra time to file and pay any taxes due. This July 15th deadline applies to North and South Carolina state taxpayers as well.

To help spur giving during this time, there are additional deductions for Charitable Giving. If your family uses the Standard Deduction, like 90% of our population, you can take advantage of a new tax credit of $300 of your cash charitable contributions beginning in 2020.

There are additional benefits for wealthy taxpayers, corporations and other businesses; however the above tax incentives are the most common ones you will see.

Student Assistance

Students and graduates can expect benefits of college grants, work-study benefits, and loan relief within the CARES Act.

Colleges will receive government funding to be used for grants to students to pay for course materials, technology, food, housing and child care. The allocation of these funds is up to each individual college, so you should check with your school to determine if funds are available for your student.

Students who are in a work-study program can continue to be paid, even if they are not able to work, and provides additional flexibility for colleges and universities in determining aid eligibility.

As the student loan crisis continues to be problematic, the CARES Act provides help in two ways. First, employers can provide up to $5250 per employee in payments of student loan principal and interest which is not taxable to the employee. While this benefit is not the norm, if your employer has this program, it’s a good time to take advantage of it. 

Next, the new legislation suspends student loan payments AND interest accrual through September 30, 2020. This can be a huge help to your cash flow if you have been laid off and are trying to decide whether to pay bills or make dinner. 

Retirement Breaks

The government knows that in times of crisis, the biggest asset workers have available is their retirement account. Since the market value of our IRAs and 401(k)s have decreased, it’s a bad time to withdraw money too. Fortunately, if you are normally required to take a distribution, you can skip it this year.

If you have to take funds out, there are some additional rules that you need to follow. However, they allow you to take funds out before age 59 ½  without the usual 10% penalty. 

• You, your spouse or a child has been diagnosed with COVID-19.
• You’ve experienced adverse financial consequences because you were quarantined, furloughed, or laid off, or because their employer reduced their working hours.
• You experienced adverse financial consequences because you were unable to work due to lack of child care.

While these distributions are still subject to income tax, you may spread the taxes over a three year period. Or, if the amount is repaid into an IRA or employer sponsored retirement plan within three years, no income taxes will be due. 

Help from Your State

In addition to the Federal help, you may be eligible for assistance through your state’s aid programs. The CARES Act beefed up unemployment benefits by adding an additional $600 per week to the regular payments.

North Carolina provides up to $950 per week in unemployment benefits. South Carolina has a page devoted to unemployment information for individuals and businesses 

Credit Breather

If you are concerned about making any payments for your loans, be sure to contact your lender. Whether you are struggling with your mortgage, car loan, or credit card payments, don’t hide from your creditor. They want to help! 

And when you talk with them, they are required to report to the credit bureaus that you are in compliance with your payments.

Blessings

These benefits, and many others for businesses and non-profit organizations, are here to help you. Use them to help keep your family afloat until the job market returns. 

I recently heard this: The storm wasn’t over when the boat got to the other side. It was over when Jesus got in the boat. Try not to become overwhelmed with the news. Hug your kids. Pray. And count your blessings. 

Still unsure about the emergency relief options available to you as a result of the coronavirus pandemic? We’ve got you covered with a printable checklist — click here to download! 

Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. We serve young adults and working families by providing personal financial planning and asset management for a simple fee. www.pathfinderplanningllc.com

The post COVID and the CARES Act – What Working Families Need to Know appeared first on Pathfinder Planning.

In 2019, the average tax return was a little over $3,000 — which, no matter your income level — is nothing to sneeze at. I mean, an extra $3,000 added to your budget could cover a lot of shoes, that Peloton bike you’ve been eyeing, or even a weekend getaway that your family so desperately needs. 

But before you go on a shopping spree or otherwise splurge with your refund, you might want to consider some other options — like using that cash for home improvements or paying down your student loans. 

If you just received a big, fat tax return and don’t know what to do with it, here are my top three recommendations to put it to good use.

Sock it Away 

This is probably the single most important thing you can do to maintain strong financial health and prevent yourself from sliding into debt. Far too many of us don’t have a sufficient emergency fund. If your car breaks down, or you need to pay a large insurance co-payment, you need to have money on hand to do just that. 

Your emergency fund should contain 3 to 6 months of living expenses and should be held in an easily-accessible account, such as a savings account or a money-market account.

I’ll agree that this is the most boring thing that you can do with your tax return. But keep this research from the JP Morgan Chase Institute in mind. Research has found that the amount of cash you have in the bank is a more useful predictor of mortgage default than home equity is. People with three to four months of mortgage payments in the bank were far less likely to default than those with less than one month of payments.

Don’t be sidetracked by the fact that money in the bank doesn’t earn much, either. Remember – a bird in hand is worth two in the bush. Better to have the funds on hand than have to charge an unexpected expense and then pay interest while you wonder how to pay for it.

Bye-Bye Balance 

If you have enough in your emergency fund, consider using that tax return to pay off some credit card balances or other outstanding bills. 

In 2019, consumers spent an average of 10% of their disposable income on debt payments such as credit cards, car loans, student loans and other personal loans. Freeing up this money gives you breathing room to work on your other goals.

My two favorite ways to apply your tax return toward your debt are paying the highest interest rate loan first or paying the smallest balance first.

Paying off your highest-interest-rate debt will save you the most money mathematically. Paying off lots of little bills can be more satisfying than paying a large chunk on one bill, and it can simplify your monthly bill-paying process. This provides you with a psychological sense of victory that keeps you motivated to continue the process.

Both options will help you make significant progress toward eliminating your debt, so either one is a good choice.  

Home Sweet Home 

Once you are comfortable with some savings, and have the credit under control, do something good for yourself. 

For around $1,000 or less, you could make updates to your home that will improve your quality of life. You could repaint a room, fix a leaky faucet, buy a programmable thermostat, add new landscaping, or even pay someone to KonMari your stuff. 

These enhancements make your space more comfortable and functional for your family, and they add value to your home if you decide to sell it later.

The most important take-away here is to resist the urge to splurge first. We’re all familiar with the phrase, “treat yourself”. While it’s not a bad idea to spend money on yourself for fun here and there, it might not be the best way to spend your tax return. 

So, take a hard look at your finances and figure out what to do with your tax refund so it improves your financial standing — instead of staring blankly at your bank statement a few months from now wondering where the money went.

Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. For more information, visit www.pathfinderplanningllc.com. 

The post 3 Smart Ideas for Your Tax Refund appeared first on Pathfinder Planning.

As a planner, I like being organized. So, when I saw the Netflix show Tidying Up with Marie Kondo, like many of you — it became my new guilty pleasure. 

For those unfamiliar, Marie Kondo is a superstar in the world of organizing who has completely revolutionized the art of decluttering with her trademarked “KonMari Method”.

Her philosophy is simple: hold on to things that are dear to your heart while getting rid of those that no longer spark any joy.

As I binge-watched her transform messes into neatness, I started cleaning my closet. And cabinets. And my husband’s clothes.

As I saw the slow but methodical transformation of my own house, I started wondering how her tidying concepts could apply to our finances.

With that thinking, I thought it would be fun to take a look at the budgeting equivalent of Kon Mari. OK, so I have a weird sense of fun.

Let’s get started, shall we?

Commit Yourself to Budgeting

For each show, I noticed how the entire family was involved in the cleanup. Each person became responsible for tidying their own items and finding what gives them joy. The same rule should apply to your budget. 

On the show, Kondo begins each episode discussing the importance of answering the question: why do I want to do this in the first place? That is, ‘what is the underlying emotional reason for wanting to have a more organized home (or in our case, a more organized budget)? 

If you don’t know your “why,” you will probably never start. Even if you do begin, you’ll quit before realizing any meaningful results. 

Also, without knowing the “why,” family members have a difficult time getting excited. 

Everyone has to commit to the budgeting process. It doesn’t work if Mom is on board, but Dad isn’t. You have to work as a team.

Imagine Your Ideal Lifestyle

Do you like scrambling to pay for unexpected expenses? Or making loan payments every month? Maybe you would rather spend time at the park, travel or focus on your special hobby.

In her book “The Life Changing Magic of Tidying Up”, Kondo wrote: “The question of what you want to own is actually the question of how you want to live your life.”

So, spend some time talking about your values and your future. Does your spending and overall habits with money reflect your ideal lifestyle? If not, think about how you can align your finances with your ideal lifestyle.

Start with the vision of what your best financial life would look like to help shift your mindset and shape the criteria for what brings joy to your world. This will allow you to create a budget that supports that vision.

Tidy By Category

We all have mental buckets or other means of categorizing our finances. You will want to address each of the three major categories individually: Cash Flow, Risk/Insurance, Investments. 

Focus on one category at a time. As a result, you’ll create an overarching picture of your current financial state. 

Follow the Right Order

As a continuation of the previous idea, when you make the decision to declutter your budget, make sure to do it slowly and follow the right order. 

Just like tidying has a specific order, so does budgeting. We begin with your Cash Flow. 

Income: Are you making the most of your income potential? Do you take advantage of your work benefits? Are you considering a side job? Are your savings and investments earning the most they can for you? These items are all part of your income.

Giving: Whether you give to your church or another organization, decide what type of organizations you want to support and allocate that money first. In addition to making us feel good, studies show that giving is good for our health, promotes social connections and cooperation.

Savings: I’m firmly convinced that regardless of stock market returns, saving on a consistent basis is the surest means of having money to meet your future goals. Allocate your savings before you spend so you’ll have money for a rainy day.

Debt: Before you can truly experience joy, you must get rid of the things that hold you back. That means paying off your debt. It may take some time – no one gets into debt overnight, so you can’t get out of it overnight either. Set up a payment schedule and focus on getting loans and credit cards off of your books.

Fixed Expenses: This is one of the most challenging areas of our budgets. Fixed expenses are difficult to change as we think we need them all. Ask yourself: Does this big house spark joy for us? Or does it feel like a weight to maintain it? Do we need to sell the car and buy a less expensive one? Addressing your fixed expenses may involve lifestyle changes, which is why everyone needs to be working together toward your family’s shared values.

Variable Expenses: Now, you are ready to tackle the items that we often think of as budget busters: groceries and food, movies and entertainment, clothing, memberships and kid expenses. Examine each category and ask yourself: Does this item bring our family joy? Do we want to carry it into the future? Does this support our values? What would happen if we didn’t spend in this category?

By tackling one category at a time, you prevent budget overwhelm and allow yourself the time to see if your new budgeting strategies are actually working.

Does it Spark Joy?

Once my closet was neat and organized, I was able to keep it that way for a year! I like the way it looks and it’s so much easier to put things away. Clothes don’t get lost, and it makes me smile.

Look at your new budget and if you can smile, you have done it right. Continued budget maintenance will help move your family towards your ideal lifestyle.

Just as Marie Kondo’s tidying method is life-changing for the families she helps, addressing your cash flow can be transformative for your family. 

Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. For more information, visit www.pathfinderplanningllc.com. 

The post How to KonMari Your Budget in 2020 appeared first on Pathfinder Planning.

Our childhood role models, however, don’t always cut it when we reach adulthood. Let’s investigate how Nancy’s life defied good financial planning.

A Spendthrift and an Enabler 

Going to all those college dances, jetting around the country on vacation, and giving to the needy consequently racked up quite a lot of bills. Nancy’s father, Carson Drew, a prominent lawyer, gave in to her every whim. 

She was able to beg and cajole her absentee dad into getting most anything, all in the name of “helping others”. Carson would hand over some cash and say: “now promise me you’ll be careful.” He never said: “bring back the receipts.” Neither of them were able to say no, ignoring a basic tenant of good budgeting. 

If Carson had budgeted for travel ahead of time, by June Nancy would be sitting on her front porch wondering about the mystery of the missing iced tea. Budgeting takes time, effort and discipline – none of which were evident in these stories.

Hello, SR-22 

Nancy Drew is a car insurer’s worst nightmare. For example, villains often tried to run her off roads and into ditches. 

She wrecked her own car, and frequently wrecked cars of friends, acquaintances, and don’t even ask what she could do to a rental car! 

Her father continued to purchase new convertibles for her (see enabler above). As a result, she never developed a healthy respect for the costs involved in driving and maintaining a vehicle. Surely, her poor driving record would have resulted in driver’s license revocation and expensive SR-22 insurance for high-risk drivers.

Open Door Policy 

Nancy’s home was a revolving door for criminals. Only her housekeeper, Hannah, had the sense to rig a makeshift burglar alarm with pots and pans. Couldn’t they have at least have installed some type of permanent alarm system? 

Intruders entered through windows upstairs and downstairs, so they hid in the garage. They ransacked the house and stole a variety of items from the mundane to the exquisite. The Drew’s homeowners policy was probably loaded with expensive riders to cover this type of theft and damage.  

To Be or Not to Be

Nancy constantly put her life in danger by taking unnecessary risks. She would run into dangerous situations with no concern for her own life. She has been slapped, pushed, hit over the head, drugged, bound, gagged, and left to starve. 

While her efforts to help others were noble, I’m sure any reasonable term-life underwriter would have denied her life insurance due to perilous activities. She may have been able to purchase more permanent life insurance, useful for paying her debts upon her death (see spendthrift above).

Uneducated, Unemployed and Unmarried

Nancy Drew graduated high school and did not attend college. Based on her skill set and her father’s clout, she would have been a natural for higher education; however, she only took art lessons. 

Having no marketable skills, Nancy was perpetually unemployed during a time when the economy was booming (1950’s). She only wanted to have fun with her friends and had no interest in a real job. Nancy did not seem inclined to pursue her special friend, Ned, into matrimony either. 

Although “a man is not a plan”, her noncommittal attitude and lack of employment leaves one to wonder how she would get by on her own and how she could possibly save for retirement. Maybe she was planning on a big inheritance from her father, or special gifts from the people she helped.

Tax Evasion 

Which brings us to tax evasion. Nancy often received a gift as a memento of her adventure. Some of them were quite rare and expensive. Nancy always claimed to be an “amateur detective” therefore she did not report any income or claim the expenses associated with her “business.” I’m sure the government would be interested in recovering that original Paul Revere bell she received. 

The Secret of the Financial Plan

As we mature from children into adults, the real world sets in and we have to put aside juvenile things. We must budget and plan, save and record, avoid unnecessary risks, and capitalize on our strengths.

If Nancy had planned for her future, she would have been a better risk manager, saved some of those travel funds, and considered how she would function once she moved out on her own. Alas, when you are forever 18, these things don’t really matter.

As adults, however, we sometimes need to seek help with our financial direction. Unlike Nancy Drew, the answers don’t fall in our laps. We must plan.

Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. For more information, visit www.pathfinderplanningllc.com. 

The post Why Nancy Drew is Poor appeared first on Pathfinder Planning.

David and Karen are a typical busy family. David works for a mid-sized firm in the marketing department and earns a good income. Karen is the primary caregiver for their three kids and does some part-time work on the side.  

They haul the kids to soccer and dance classes. Both volunteer with their favorite charities. They spend time at the gym and keep up with the yard on the weekends. 

And the kids love peanut butter and jelly sandwiches. Lots of peanut butter and jelly sandwiches!

Once a month, when David and Karen sit down to pay bills, the tension in the air is unmistakable. 

On paper, they make enough to pay all their bills — yet they still feel broke. And when a big unexpected expense shows up, they scramble to put cash together or just put it on the credit card. 

When their oldest child was born, they began a college savings account with a small balance. They never seemed to have time to open accounts for the other kids and they wonder if they even have enough money to make contributions.  

One area they feel good about is their insurance. David has life insurance coverage through work and Karen has a small whole life policy that she pays every month. They don’t know much about the coverage, though.

Retirement seems so far away that any thought of saving gets set aside in favor of more pressing financial needs. Between 401(k)s, IRAs, ETFs, and the alphabet soup of other financial acronyms, they don’t even know where to start.

With all these competing priorities, David and Karen are completely overwhelmed. 

Maybe that feeling is familiar. 

Whether it’s investing for your kids’ college expenses, building savings to fund a major home renovation, or stashing away enough for a comfortable retirement — chances are, you’ve got a few financial goals weighing heavily on your mind.

I know because David and Karen aren’t the exception when it comes to the types of clients we serve — they are the rule. 

Managing competing financial priorities isn’t miraculously resolved after one meeting with our team. We’ve been serving families since 2010, and found that change doesn’t happen overnight. You must first organize your accounts and set your goals. 

Step back to see the big picture of your finances

Before you can begin to prioritize your financial goals, you need to first get organized by laying everything out on the table. This process of taking inventory will help you develop a clear understanding of your overall financial picture and put you on the path toward determining what is most important.

Start by asking yourself these important questions:

• Do you tell your money what to do or is it telling you? Put a different way: Do the largest items in your budget reflect what you value most in your life? 
• How much do you currently have saved for retirement? Is it enough?
• How much and what type of debt do you have (credit card, student loan, etc.)?
• If you were faced with an unexpected emergency, would you be financially prepared to handle it?
• How much do you save per month outside of your retirement accounts? 
• Where would you like to be financially a year from now? What about five years from now?

Reviewing your finances in this way should lead to a deeper understanding of the gap between your current financial state and where you aspire to be. 

This was the case for David and Karen. 

Any holes that could have potentially derailed their plans were addressed. They began to brainstorm on how to pay for college while simultaneously saving for retirement. An insurance review discovered that they needed a different type of coverage. They learned more about investing and began saving more. They gained clarity on their finances without all the confusing jargon.

David and Karen’s bill paying battles turned into a monthly strategy session, as now they were working together as a team. 

But this would not have been possible had they not taken a holistic look at their finances and assessed what mattered most. 

Assess what matters

Perhaps you’ve considered replacing the 15-year old family SUV with a newer model. It’s costing you more in repairs than it is worth — but you’d also like to take the family on a nice vacation next summer. Once you have a better understanding of your finances, you can distinguish between what is essential and what could be delayed without major consequence.

For example, you don’t want to compromise on things like:

Saving for retirement – Many people delay saving for retirement because they assume that time is on their side, believing that they can always save more when they’re older or simply retire later. What they fail to realize, however, is that due to illness or an unexpected layoff, you may be forced to retire sooner than expected. Not to mention, the earlier you start setting aside funds for retirement, the more you have to gain, thanks to compounding interest. 

Establishing an emergency fund – We rarely know when a medical need, car accident, job loss or any other unanticipated event may occur, so we should always be prepared to handle the financial consequences. This is why I cannot stress the importance of setting up a strong emergency fund. Without one, you’re vulnerable to all kinds of unexpected financial setbacks. This includes an increased likelihood that you will have to take on debt. 

Paying off debt – There is no good reason to hold onto debt any longer than necessary. In fact, because of the steep interest rates for many loans, you could pay significantly more in interest than the amount you originally borrowed. So get rid of your debt ASAP. It will allow you the ability to save and invest in more meaningful goals.

In the case of David and Karen, they put forth the effort needed to become more confident with their money choices. They were able to gain a feeling of security that comes with a solid plan. They knew that even if life went awry, they had resources in place to manage it. 

And you, too, can feel that same sense of relief. 

While the process of prioritizing your financial goals will not come easily, with sound financial planning, you can create a well-rounded budget that will help tackle your money-related ambitions — some of them simultaneously, in fact. 

Just remember to separate your need-based goals from the desire-based ones. Prioritize retirement, emergency savings, and paying down high interest-rate debt first and you should be well on your way.    

Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. For more information, visit www.pathfinderplanningllc.com.

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Have you spent any time envisioning what your retirement will look like? I have. Here’s our ideal plan. My husband retires from his company when our youngest heads off to college. Then we sell our home and move to the mountains. “The mountain home I don’t have,” as I call it, will be smaller than our current home, very energy efficient, and much easier to keep clean. 

In this ideal world, our housing costs shrink, there are no kids to eat all the food, no homeowners dues, and lower taxes. Then, my husband can work at what he loves to do instead of running the rat race.

Not everyone’s retirement needs are the same; some people aim to spend their retirement in luxury, while others simply want to maintain the same standard of living during their golden years as they had during their working life. So, the income you will need in retirement will largely depend on your own needs and goals.

Your Retirement Income

Once you transition into retirement, your income level and the source of your income both change. For most of your life, your income probably comes from your job. While some people might have one or more income streams that are not related to their paycheck, most of us work at our job (or jobs) and use this income to pay our bills and save for retirement. 

When retirement finally arrives, the paychecks generally stop. This is why retirement planning is so important. With the right savings plan in place, you will have the retirement income you need to live the life you want. 

But where exactly does retirement income come from? There are three main sources of retirement income.

The first is Social Security. This is a very basic level of income, but not enough to sustain you to live comfortably. You will need more.

The second source of income is some type of recurring income. Think of this as a pension, income from rental property, an annuity policy, or some other source of regular passive income. Not everyone has this reliable source of income, so you will need more.

The third source comes from personal savings. This your company’s 401(k) or 403(b) plan. It also includes IRA’s and Roth IRA’s as well as other savings and investments you have. 

You may need to draw money from alternative sources, such as a second job or your home equity. All combined, your goal is to be able to cover your expenses for the duration of your life. 

Your Retirement Expenses

You would think that your expenses and overall cost of living would stay the same during your working years and retirement, but this is generally not the case. Expenses can fluctuate for a variety of reasons. For most people, the following categories of expenses are the most likely to change from your working years to your retirement:

Housing Expenses

Working adults usually rent or pay-to-own a living space. Owning your home going into retirement will help cut down on living expenses as you age. You may, however, wish to adjust your living situation by moving into a retirement community, or to a less expensive apartment, house or condominium. The type of housing will also affect your utility costs, though these costs do not usually change as much when you retire.

Medical Expenses

Younger, working adults generally face fewer health complications and do not need to make use of health services as often. However, as we age, we face an increasing number of health complications and associated costs. Medicare covers some of these costs, but you will still have to pay part of your medical bills out of pocket. A large chunk of your retirement income may go toward medical expenses, including doctor’s visits, medications, and age-assistance services.

Travel & Leisure

During your working life, you may not always have the time or funds to travel as much as you’d like. Once you retire, you can dedicate more time to leisure activities like travel, but you must also find a way to pay for it. Even if you have no desire to travel, you may have other expenses associated with leisure activities and hobbies. 

Retirees tend to travel and be more active in the early years of retirement when they are in good health. You may find that you spend more early on but run out of funds in your later years as medical expense increase. So, if you’d like to spend your golden years traveling the world or participating in other fun activities, you will need to consider these expenses when planning your retirement.

How Much Do You Really Need in Retirement?

Many factors and individual goals will affect the income you need in retirement. That said, conventional estimates offer a good guide to help you determine your own retirement needs. Traditionally, financial advisors recommend aiming for a retirement income equal to 80% of your current income. For example, if you currently make $100,000 per year, you should work to make $80,000 in retirement income annually.

Why do you need less money in retirement if some of your expenses (medical, travel, etc.) will likely increase? When you’re working, a significant portion of your paycheck goes toward retirement savings. Once you’ve retired, you can start drawing from your retirement funds rather than paying into them. In addition to these savings, expenses tend to be greater earlier in retirement and then drop off as we become more infirm and more difficult to get around. Our world gets more limited, which means that our retirement income does not necessarily need to be as high as our working income.

It is also important to note that, while 4% has been bandied about as a safe amount to withdraw from your investment portfolio, this number will also vary based on your needs. You may have higher medical expenses than expected, or perhaps you’d like to use some of your retirement funds to redecorate your house or pay for travel. In any case, you’ll want to carefully calculate how much you withdraw to ensure that your retirement income does not drop too low. 

The Bottom Line

If you’ve read this far, it’s safe to say you understand that planning for retirement is a lifelong process and not something that happens shortly before you stop working. You can expect your planning to undergo a series of changes throughout your working years. 

At each step, however, you will evaluate your progress, adjust targets and make decisions so you can meet your ever-changing goals. 

A successful retirement does not solely depend on your ability to save and invest wisely but also on your ability to plan — which leads us to the question in the title of this post: How much income will you really need in retirement? Well, the answer is….it depends on your specific needs and goals. But one thing’s for certain. It’s much better to be overprepared than do nothing and hope for the best.

Are you looking for personalized advice to improve your retirement income? Jumpstart your savings and debt management strategy today with Pathfinder Planning!

Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.

Your Financial Mom blog posts are not meant to be legal, accounting or other professional service advice. Content represents the opinion of the author only. Pathfinder Planning LLC is not responsible for the accuracy or validity of content contained in third-party comments.

www.pathfinderplanningllc.com

The post How Much Income Will You Really Need in Retirement? appeared first on Pathfinder Planning.

Pay down debt or save for retirement? 

Many of my clients have a lot of competing priorities, and the most common one is whether to pay down debt, or save for retirement. It’s probably a question we have all asked ourselves at one time or another. While there’s no one-size-fits-all answer, there are certainly some pros and cons to both options that you should consider. 

Deciding how to deal with competing priorities requires an evaluation of your specific circumstances, as well as your financial goals. In any case, let’s take a look at some advantages and disadvantages of these two big options.

Advantages of Paying Down Debt 

• You learn to live on a budget – For some people, this may sound like a negative. However, budgeting is a learned skill that is vitally important. Making higher payments on credit cards, mortgages, or other loans will invariably require you to cut back in other areas. This, in turn, will necessitate a strict budget that is aggressive, without being unrealistic. Once your debt has been paid off, these new skills will carry over into other areas, like investing and saving for retirement.
• You can save a lot of money on interest – Interest rates on loans tend to be much higher than those on savings accounts, so paying down your debt first can actually save you more money in the long-term. The faster you pay down your debt, the less you will pay in interest.
• It takes a huge weight off your shoulders – It goes without saying that having debt is stressful. From a credit card that you struggle to pay down to an auto loan with high monthly payments, debt can really make you worry about your financial footing. Paying off all of your debt is one of the most satisfying and worthwhile things you can do for your future.

Disadvantages of Paying Down Debt 

• It takes away from your cash flow – Paying down debt will help you learn to live on a budget, but it will also require you to dedicate a large portion of your cash flow to loan payments. This, in turn, will require you to live very frugally for a few years. 
• You may struggle during an emergency – It is always smart to put aside savings for an emergency, but if you are focusing your attention on debt payments, you won’t have much left to save. If an emergency situation does occur, you may not have the necessary funds to cover the additional expenses. 

Advantages of Saving for Retirement

• It’s very easy with a 401k – Assuming your employer offers it, a 401k plan is one of the easiest ways to save for your retirement. A 401K allows employees to set aside a portion of their paycheck before taxes are taken out. This way your savings are invested and have the potential to accrue greater earnings over time. Additionally, your employer may match your savings, which is essentially free money for you, with the added bonus that your taxes will either be lower or delayed for many years.
• If you start early, you will see a lot of growth – Most people know that you should start saving as soon as possible, but it is often difficult to understand the importance of savings when you are still in your 20’s. However, if you start setting aside money during this time, your savings will see a lot of growth by the time you’re ready to retire.
• Saving gives you peace of mind for your future – While the future is never certain, having a healthy savings plan can help stave off the uncertainty of retirement. Many people worry that they will not have enough to cover their expenses once they are too old to work, but making a savings plan (and sticking to it) can help eliminate this fear.

Disadvantages of Saving for Retirement

• It diverts funds away from your current expenses – If you live paycheck-to-paycheck, setting aside money for retirement might feel like a luxury you simply cannot afford. Thankfully, there are ways to save for almost any budget. You may need to cut back on non-essentials or change your current lifestyle.
• Saving is a slow process in the beginning – When you first start saving, you will not see very much growth. This often causes many people to take their money out of savings, but this is a huge mistake. You will need to power through the early years to see how your money can accumulate.

So Which Is Better: Paying Down Debt or Saving for Retirement?

Honestly, why not do both? If you have a retirement plan through your employer, try to contribute as much as you can – at least enough to get the company match. You won’t miss this money since it comes out of your paycheck first and never makes it into your checking account.

This will allow you to focus your remaining funds on paying down your loans. Your minimum payments should already be part of your budget and, whenever possible, you should budget for more than the minimum. If your regular take-home pay is not enough, then you know you need to make some spending decisions. 

Should you really want to speed up the process, consider getting a side-gig or working freelance in your spare time. If you do whatever it takes to pay your debts quickly and save for retirement, your future self will thank you. Remember: no one gets in debt overnight, so you don’t get out of it overnight either.

Are you looking for personalized advice to improve your finances? Jumpstart your savings and debt management strategy today with Pathfinder Planning!

Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.

Your Financial Mom blog posts are not meant to be legal, accounting or other professional service advice. Content represents the opinion of the author only. Pathfinder Planning LLC is not responsible for the accuracy or validity of content contained in third-party comments.

The post Should You Pay Down Debt or Save for Retirement appeared first on Pathfinder Planning.