7 Retirement Rules to Live By

Rule No. 1: Have a plan — and Follow it

You absolutely need a plan — otherwise you’re leaving things up to chance, which is never a good idea. Take the time to figure out how much money you’ll need to live on in retirement and how you’ll save it.

One rule of thumb is that you’ll need 80% of your pre-retirement income in retirement, but you should do your own calculations. You can also work backwards, using the 4% rule of thumb, which tells us you can safely withdraw 4% of your nest egg in your first year of retirement, and adjust upward for inflation thereafter. Many people wind up spending far more money in retirement than they did working, due to pricey retirement activities or unexpected health conditions, which don’t come cheap.

Try this simple online compounding calculator to jumpstart your planning. Start by putting in your expected investment growth rate for the interest rate, and try out different savings levels. For example, if you start with $10,000, you save $10,000 each year in a tax-advantaged retirement account, and you expect it to grow an average of 8% annually, over 20 years, you’ll end up with about $540,000. Try different scenarios that are realistic for you and keep track of a few estimates to create a range to shoot for. The 8% growth comes in when you invest your savings in the stock market wisely, combined with the power of compounding.

Remember that your money might need to last a long time if you’re lucky to live longer than average, so plan conservatively. If you retire at 62, for example, and then you live to 100, you’re retired for 38 years. Don’t assume that you’ll be able to retire exactly when you want to, either. According to the 2016 Retirement Confidence Survey, 46% of retirees left the workforce earlier than planned, with 55% citing health problems or a disability as the reason and 24% citing changes at work such as a downsizing or workplace closure.

Rule No. 2: Save aggressively and invest effectively

There’s a good chance that you, like most Americans, are behind in your retirement savings. Of Americans aged 55 or older, 28% have less than $25,000 saved, according to the the 2018 Retirement Confidence Survey. Younger folks are in worse shape — more than half have less than $10,000 socked away — but fortunately, they have plenty of time to gain ground. As long as you have a few years before you retire, there’s still time to significantly improve your financial condition by your retire date.

Start by maxing out your IRA contribution each year (most of us can contribute $6,000 for 2019, and those aged 50 or older can contribute $7,000) — and try to max out your 401(k) contribution, too (with 2019 contribution limits of $19,000 for most folks and $25,000 for those 50 or older).

The below table shows how much a lump sum accumulates over various periods when your investments grow by an average of 8% annually. (The stock market has averaged annual gains of close to 10% over long periods, but over your specific period, it could be much less, or more.)

Growing at 8% for$10,000 invested annually$15,000 invested annually$20,000 invested annually
5 years$63,359$95,039$126,719
10 years$156,455$234,682$312,910
15 years$293,243$439,864$586,486
20 years$494,229$741,344$988,458
25 years$789,544$1.2 million$1.6 million
30 years$1.2 million$1.8 million$2.4 million

The 4% rule is flawed, but it is helpful in figuring out how well your savings will serve you in retirement. It suggests withdrawing 4% of your nest egg in your first year of retirement and then adjusting for inflation in subsequent years. Here’s how much income various-sized nest eggs will generate in year one:

Nest Egg4% First-Year Withdrawal
$250,000$10,000
$300,000$12,000
$400,000$16,000
$500,000$20,000
$600,000$24,000
$750,000$30,000
$1 million$40,000

How should you invest your dollars? For most people, it’s best to just stick with an inexpensive broad-market index fund like one tied to the S&P 500 index, that will deliver roughly the same returns of the overall stock market. Index funds have tended to outperform managed stock mutual funds over long periods, so don’t allow yourself to be enticed by a sweet-talking mutual fund pusher.

Rule No. 3: Tend to your physical and mental health

Planning for retirement and living well in it might seem to be largely about money — saving enough, keeping it allocated properly, spending the right amount, and not running out of money. Those are indeed important considerations, but there are other important components of retirement — such as your health, both physical and mental.

Consider this: A 2014 MassMutual survey found that 10% of retirees were surprised to find themselves lonely, bored, with a lost sense of purpose, and/or depressed in retirement. So plan to stay active and social in retirement, too. Being physically active can keep your bones and heart strong, while being socially active keeps you mentally and physically healthier and could even keep dementia at bay. Think about getting a part-time job, a side hustle, joining a club, or taking up a new hobby. It’s not a bad idea to start looking into possibilities well before you retire.

Rule No. 4: Don’t forget healthcare costs

Speaking of health, don’t forget to factor healthcare costs into your planning. A 65-year-old couple retiring in 2019 will spend, on average, a total of $285,000 out of pocket on healthcare, according to Fidelity, of course, that’s an average so you’ll probably spend more or less.

Rule No. 5: Remember your RMDs

If you have any money in traditional IRAs or 401(k)s, remember to take your required minimum distributions (RMDs) at the right time — when you reach age 70 1/2.

If you fail to take these annual withdrawals on time, you’ll face a hefty penalty — 50% of the sum you should have withdrawn as your RMD. These are annual deadlines, so set yourself a reminder on the calendar each year so you never forget.

Rule No. 6: Don’t cash out, and don’t exit completely from stocks

If you’re thinking that once you approach or enter retirement, you’ll need to sell all your stocks and buy bonds or just move that money into CDs, think again. Yes, it can make sense to keep a portion of your retirement war chest in a “safer” place than the stock market. But remember, for funds you won’t need for at least five or ten years, the stock market is one of the best ways to grow that money. If you have 20 or more years of retirement ahead of you, a big chunk of your nest egg can keep growing for more years before being moved. You might reduce your risk by favoring stable, established blue chip stocks, including dividend payers, instead of would-be highfliers.

Learn what a bond ladder is and be smart about aligning your portfolio allocation with your timeline. Meanwhile, don’t cash out retirement accounts early. That stops the money from growing more, and it can mean penalties and taxes, too. Many people cash out when they change jobs, a move that short-changes their financial future.

Rule No. 7: Be smart about Social Security

Finally, the last important retirement rule: Find out how much money you can expect to receive from Social Security and incorporate this monthly income source into your retirement planning.

First, visit to the Social Security website to set up a “my social Security” account. Here, you can view records of your past earnings and estimates of your future benefits. The average monthly Social Security retirement benefit was recently $1,467, or about $17,600 annually, while the maximum  monthly benefit for those retiring at their full retirement age (FRA) in 2019 is $2,861 — $34,000 for the year. If those sums seem too small to sustain your retirement, remember that if your earnings are above average, you’ll collect bigger checks, and there are ways to increase your Social Security benefits, too.

The more you read up on retirement issues and the better you plan for your financial future, the more comfortable and low-stress your golden years are likely to be.

The $16,728 Social Security bonus most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,728 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. 

For more info and financial advice feel free to drop in on my Taxes, Bookkeeping, and Financial Wellness Facebook Group!

Creative Ways to Increase Income

Know Your Worth

Times are tough right now during a global pandemic and you are not the only one trying to increase your income. Know your worth. You are worthy of money. Repeat that to yourself right now. Just because times are tough now doesn’t mean they always will be. It is up to you to get off that couch and look for new beginnings or new opportunities. There are new challenges now of course but that just means we adapt to the changes. I’m going to give you some creative ways to increase your income TODAY!

Sell Stuff Online

Everyone has a closet filled with clothes they bought a decade ago, unless you are a minimalist then you have nothing. Move along… Anyway, Like I was saying… Everyone has junk laying around that they can easily create an eBay account or poshmark account to sell these items on. There are many other sites you can utilize to sell things on for cheap.

  1. Ebay
  2. Poshmark
  3. Amazon
  4. Craigslist
  5. ThredUp
  6. Facebook Marketplace
  7. Offerup
  8. Letgo
  9. Cash4Books
  10. Decluttr

Other ways to generate more income include:

  1. Rent a room
  2. Drive people around
  3. Deliver food
  4. slicethepie.com—- Review unsigned artists and get paid for it
  5. Negotiate salary

Popular Side Hustles:

  1. Driver
  2. Coach
  3. Sales Rep
  4. Virtual Assistant
  5. Blogger
  6. Freelancer

Everyone is capable of increasing their income. You just have to get creative and start with a plan. Planning doesn’t come naturally to some people but it might be worth it to try. If you have been laid off and can’t even fathom driving people around why not dive deeper and consider turning a hobby that you really enjoy into a new small business. If it’s crafting you enjoy why not channel your feelings and emotions into creativity and open an Etsy shop to sell these items. There is always a way, you just have to find what works for you.

Dave Ramsey’s 7 Baby Steps for Your Budget

Baby Step #1: Save $1,000 for Unplanned Expenses

I love this step. I always tell my clients to AT LEAST have $1,000 in their savings for emergencies. You SHOULD have 3-6 months worth of bill money saved as well to be very secure in your financial wellness. I personally, have a years worth of bill money saved just in case because you never know what could happen. I do not like being caught off guard. Having this money set aside gives me a sense of security and freedom.

Baby Step # 2: Pay Off All Debt Except for the House

This makes so much sense. I am very proud of my finances and even I am still in debt. There is good debt and there is bad debt. Having a mortgage is good debt. Especially if you are making those payments on time. Now, credit card debt is bad debt. This is something you should pay off before making any major money decisions. I would recommend reaching out to the company you have the credit with and negotiating a lower interest rate. Also, student loans and/or personal loans are debts you should work towards paying off before you make major money decisions. Lets say you wanted to start trying to buy a home, you need to pay off the debt to increase your credit score therefore having a better chance at a larger loan. It will also lessen your debt to income ratio. You can claim student loan interest on taxes. Paying off debt is something everyone should do as soon as possible.

Baby Step #3: Save 3-6 Months Worth of Expenses

This! I love this! As mentioned in Baby Step #1, I have a years worth of bill money saved for no other reason than my own personal standard. It is something everyone should do. Maybe not a years worth but definitely 3-6 months worth. This is always a goal for my clients because typically when they come to me they didn’t even think about having an emergency savings so adding this into the mix is mind blowing. This is a game changer for your stress. Imagine having this money saved so if in the case something comes up and you cant work for 3 months, you’ll be covered. That sense of security is what helps me stay on tops of my finances. I want to always feel like I am secure.

Baby Step #4: Invest 15% of Your Household Income

Investing is so crucial to your future life. Lets say you bring in $3,000 per month, you would need to put $450 into your investments. I know, $450 can sound like a lot right now in these pandemic times but it’s realistically the best thing you could do for yourself even though the market is bearish currently. It will come back into a bull market. Your future self will love you come retirement time. that $450 will add up and grow. When you invest you have to make smart money decisions, and also come to terms with the fact that your money might be lost at one point or another. In the end if you gain money you will be happy and if you lose money you will be wise.

Baby Step #5: Save for Your Children’s College Fund

According to data reported to U.S. News, in an annual survey last year, the average tuition for the 2019-2020 school year ranged from $41,426 (for private colleges) to $11,260 (for state colleges). That’s the average tuition per year. And unless something changes in how people pay for education, college costs in the future are going to be even worse. Here are some ways you can start saving for them now:

  • Open a 529 Plan
    • They are savings plans, usually sponsored by state governments, that encourage saving for future education costs. They often are tax-friendly, in the sense that many states will let you deduct your contributions from your state income tax – and when you withdraw the money for college, the money won’t be taxed. You can put money into your own state’s 529 – or any other state’s plan. So if you live in Idaho but like Indiana’s plan better, go for it.
  • Put Money Into Eligible Savings Bonds
    • Some of the advantages of putting money into savings bonds is that they’re guaranteed by the government and extremely low to no risk. On the downside, the interest you’ll earn is pretty low. Right now, individual Series EE savings bonds are earning an annual fixed rate of 0.10%.
  • Try a Coverdell Education Savings Account
    • This is a tax-deferred trust account that can be used to pay for elementary, secondary and higher education expenses – room and board is permitted. Earnings accumulate tax free, and distributions are free of income taxes as long as the funds are used for educational purposes.
  • Start a Roth IRA
    • A Roth IRA is an excellent vehicle for many taxpayers to invest after-tax dollars while shielding earnings and future growth from taxes forever, as long as appropriate distributions are made. As with any investment, you want to look at the pros and cons carefully – for instance, other relatives can contribute to a 529 but not a Roth IRA. If you have one, you’ll obviously want to discuss this with your financial advisor. With a Roth IRA, should a child decide not to attend college, the parents already have those funds invested for their retirement.
  • Put Money Into a Custodial Account
    • In other words, savings accounts called UGMAs and UTMAs (Uniform Gift to Minors Act and Uniform Transfers to Minors Act). They’re both virtually the same thing but UTMAs can hold assets beyond cash, stocks, mutual funds and so on, like a UGMA – but also real estate. There’s no limit in how much money you can put into a UGMA or UTMA, but this is best with a child whom you believe is responsible. Your child will legally be able to use the money in the account – for college or anything else – when they turn 18.
  • Invest in Mutual Funds
    • There’s no limit on what you can invest, and of course, you don’t have to use the money for college. But what you earn will be subject to annual income taxes, capital gains will be taxed when shares are sold and the mutual fund’s assets can reduce financial aid eligibility.
  • Take Out a Permanent Life Insurance Policy
    • A permanent life insurance policy is a conventional life insurance policy, but some of the money from your premium goes into the death benefit, and some of the money goes into a tax-deferred savings account. One of the pluses of doing this is that the money you save can be accessed at any time for any reason, so it is not limited to college expenses. It provides additional benefits such as a death benefit, and other living benefits, and there is no adverse impact if it is not used for education expenses. There are upfront and recurring fees that might make you think twice before doing this.
  • Take Out a Home Equity Loan
    • Of course, you probably weren’t intending to use your home equity to pay for your kid’s college – and with a loan, you’ll have to pay that back. So as a college fund for kids strategy goes, it’s not really the best approach – if you still have years in which you could be saving money for future education costs. But if you haven’t saved enough and are looking for a way to pay for tuition, not to mention room and board, it may work out well. But that’s why you want to start early – so you don’t have to take out as many loans – and as with any investment but especially with college savings plans, it’s always best to begin putting aside money as soon as you can. You always want to try to start your investments yesterday as opposed to tomorrow.

Baby Step #6: Pay Off Your Home Early

Remember this is good debt? Paying it off early doesn’t hurt though. It will boost your credit score when you make more than the minimum payment on any debt and this is included. Even if you pay $100 more than required it will keep you on the right track to paying your home off earlier than expected. Once you have your home paid off you can put those funds into savings or retirement and get you closer to that goal. Basically, eliminate the monthly amount going toward your mortgage, freeing up cash flow that can be useful, especially during retirement. Save money on interest, potentially thousands of dollars. Receive a predictable rate of return, equal to the interest rate on the debt you’re paying down.

Baby Step #7: Build Wealth & Give

Generous People Are More Prosperous. There is a common misconception that in order to get wealthy you have to be stingy, and not be very giving. Giving to others makes you less selfish, and less selfish people have more of a tendency to do better in both relationships and in wealth building. Building wealth is the process of generating and maintaining long-term income through multiple sources. This includes your savings and any assets that generate income, such as your investments.

  1. Stay away from debt.
  2. Make a zero-based budget each month. (every dollar has a job)
  3. Save money.
  4. Live on less than you make.
  5. Be a giver.

8 Questions to Ask Yourself Before You Purchase

Question Everything

Questioning yourself is a must in times like these. People are stuck at home everyday buying things online throwing their money away because they are bored. Here are some questions to ask yourself before making any major purchase for sure:

  1. Can I Really Afford It?
    • Can you? If you can’t pay cash for it, don’t buy it.
  2. What Will I Do With It?
    • Are you buying this item because you are bored or because you actually have a plan? What is your plan?
  3. How Often Will I Use It?
    • Is it going to just get shoved into a cupboard and be forgotten about?
  4. Do I Really Even Want It?
    • Are you just bored? Is there an emotional trigger behind this purchase?
  5. Can I Borrow It?
    • When ever I go to buy something I really want I check in with myself and make sure I don’t know anyone I can borrow this item from. Bartering or trading is a great way to be resourceful as well.
  6. Is This In My Budget?
    • I always check in with my budget before making ANY purchase no matter how big or small. My budget is like a guiding light.
  7. Will I Have To Sacrifice Elsewhere?
    • You never want to purchase something with money that’s supposed to be for something else that may be important. Use funds accordingly and make smart choices.
  8. Will I Have To Finance This?
    • Using credit should never be an option unless you are fully prepared to pay the bill in full each month.

Setting yourself up for financial success means answering the easy money questions, as well as dealing with the harder ones. Being in this industry my entire life has enabled me to see different phases people go through when making money decisions. Even those who have financial advisors have their doubts about how trustworthy their advisor really is.

It seems like it should be simple: pay off debt, save money, live happily ever after, the end. But life tends to get in the way. The refrigerator breaks or an unexpected medical issue comes up. Taking those setbacks in stride isn’t easy. Especially when you don’t have anyone to answer your money questions. Most money questions tend to be very personal and specific. These questions above are baby steps in the right direction to keeping your finances under control. Getting personalized advice can be helpful, but it’s not the only way to set yourself up for long-term financial success. Answering these basic questions will go a long way toward making sure you’re on the right track.

7 Sinking Funds You Should Have

Sinking Fund: a fund formed by periodically setting aside money for the gradual repayment of a debt or replacement of a wasting asset. In other words, a savings account for certain holidays or events you need money for.

Everyone’s “savings” accounts will be for their own unique mixture of life. These are some examples of what mine look like.

  1. Christmas/Holidays

I personally go crazy during holiday season. I LOVE buying gifts for my friends and loved ones. I enjoy making people happy. This is something that is important to me.

2. Important Birthdays/Events

Once again, I LOVE buying gifts for my friends and family so this is an important category for me.

3. Car Mainenance

I had a Toyota Corolla for 10 years. Towards the end of its time with me I was having to do a lot of maintenance on it and I didn’t have a sinking fund for this. It was coming straight out of my checks.

4. Home Repairs

I am currently in a situation where I am going to need to buy a new washer and dryer and my fence needs to be re-done. I have funds for these things because I set it aside when I receive income. I save for this goal out of every dollar I earn.

5. Pet Expenses

I have a 14 year old dog who has had 3 surgeries and needs medication daily. I have a 9 year old dog who also needs medication on a daily basis. I save up for this so I can cover it on a monthly basis.

6. Travel/Lifestyle

Me and my family travel a lot under normal circumstance. I plan each trip out and set a goal for how much I plan on saving for it. Each trip is separate.

7. Medical Costs

I have this as a savings account because you just really never know. I have small children who love to play outside and we have a jungle gym so I like to be prepared.

These are MY emergency funds. These make MY life easier. I love categories. You chose your priorities.

6 Ways to Be More Resourceful With Your Money

Once you have created your budget, if you haven’t already, you will be able to see exactly how much you need to pay your bills at the very least. Budgets are the road map to your goals. It will show you your areas of opportunity so you can then decided how to spend your money.

  1. Try Bartering

If bartering sounds scary to you because you have to negotiate then you should definitely try it! Bartering is coming back. Try it at the local farmers market, Facebook Marketplace or craft fairs near you during holiday season.

2. Negotiating For a Raise

Negotiating sometimes scares people too but I say put yourself out there and know your worth. Negotiating should be about you being more valuable than they assessed you previously.

3. DIY Projects

Go on Pinterest or YouTube and check out some Do It Yourself projects that you can do instead of purchasing something for a significant amount more.

4. Meal Prep

Buy groceries instead of eating out and plan out your weekly menu. If you don’t like meal prepping then cook every night. Make it fun with the kids or a bonding thing for you and your significant other. Make your coffee at home and take your lunch to work. Every dollar has a purpose and those areas of opportunity are only taking away what you could be saving towards your long term goals.

5. Use Cash Back Apps

One that comes to mind is Ebates.com. You get a percentage of your purchases back in cash. My mom loves that app and uses it everywhere. She’s an online shopper and she says there is usually a coupon for every place she wants to shop at. Might want to check it out.

6. Eat More Meatless Meals

Meat is at a ridiculous price right now because of the pandemic and I definitely try and substitute it if I can. I love bacon and chicken but I am not so much a red meat eater. Things I substitute my meat for are eggplant, beans, or mushrooms.

These are just a few ways I can recommend looking into. Living below your means doesn’t have to be gross. It can actually be quite satisfying getting a good deal.

And for more helpful tips and support, join my Taxes, Bookkeeping & Financial Wellness Group on Facebook! You can ask all your questions there.

Journaling About Your Spending

I like to use journal prompts when I do my journaling. I journal about everything. Money, marriage, parenting, work, dogs, unicorns, friends, events… you name it. The sky is the limit on what you can journal about because its all about YOU. This is a great tool to utilize because it helps alleviate stress and boost your mood. Journaling for me helps me get everything out on the table. It helps me focus on the main priorities and hold myself accountable.

We want to BE rich, not LOOK rich.

How Journaling Helps

Journaling helps you figure out your goals and how the puzzle pieces of your finances all fit together. Debt freedom is a huge goal. Paying off debt actually becomes something real and actionable when you break it down into bite-sized pieces. Journaling makes you more aware of your financial standing. It helps you get to know yourself a little better.

Your habits and triggers for your spending are the trends you want to track in order to figure out where you should be cutting back within your budget. Journaling gives you the opportunity for positive self talk. Raise your hand if you have ever bought something and then felt extreme guilt and then beat yourself up over it. I know I have.

Here are a few prompts I use when journaling about my finances…

  • Why do I like buying things?
  • Why don’t I feel satisfied with my bank account?
  • Am I happy with my finances?
  • Am I happy with my life?
  • What is really important to me?
  • What does my dream life look like?
  • What are my long term goals?
  • What are my short term goals?
  • Do I use my budget frequently?
  • How does money make me feel?
  • How do I make more money?
  • How do I make my money work for me?

If you are feeling overwhelmed with journaling about your finances and you realize you need more help then you thought… I’m always here for you.