Financial Budgets And Your Retirement Plan

Budgets can be a hassle. I haven’t met anyone yet who loves to sit down on a Friday evening and sort out his or her budget before the weekend.  No matter how annoying or boring budgets may be they are a necessary evil.

These days we have many options to manage our money, make financial goals, and make sure we stay within our means. For the last several years computers have been helping people and businesses manage their money. The most flexible and reliable program out there is Microsoft Excel.

There are many programs to help you manage your finances but Excel has been there since the beginning. If you can find a quality spread sheet then you will be equipped with the tools you need to track your money effectively.

After trying several spreadsheets out I couldn’t find one that had everything I wanted. The best thing about Excel is the freedom and flexibility to making something from scratch. However, this is also the worst thing about finding an Excel spreadsheet to help you manage your money because you never know what you’re going to get when you try out a new template.

Since I couldn’t find what I wanted I went out and made it. I’ve looked at several spreadsheets. Many of them were ugly, had bad directions, or didn’t help me visualize where my money should be going. After looking at all the pros and cons I’ve decided to base my spreadsheet on MONEY magazines paycheck pay out percentages. MONEY magazine has a paycheck break down, which you can see here.

  • Housing
  • Utilities
  • Food
  • Automobiles
  • Debt
  • Savings
  • Clothing/Shopping
  • Entertainment
  • Personal/Misc.

The spreadsheet I created has this breakdown presented in a pie chart. Everyone has a different story though, so MONEY’s recommendations are just that, recommendations. So that is why I made another pie chart for you. You can move the percents around a little bit to best fit your lifestyle but don’t stray to far from the recommendations. Try to stay within 5-10% in each category if you can. I like the percentage breakdowns because percentages don’t care how much money you make and thus they apply to everyone. As you get promotions and raises in the future the percentage goals you’ve made won’t change, just the amount next to the dollar sign.

After you make your own pie chart some of the numbers on tab two automatically get filled in for you. The second tab is a more zoomed in look at each category. The categories MONEY came up with are pretty broad and tab two breaks them down. Tab two allows you to see from month to month if you are on budget in each category.

This is a pretty simple spreadsheet. It doesn’t get into a lot of messy stuff like taxes and such. This is a basic approach to seeing where you want you money to go and tracking it to see if you are on budget.

This budget spreadsheet works for me but I want to know what you think. Drop me an email or comment if it works for you or if you have any suggestions.

If you prefer new school technology to set a budget then I’ve got a post for that too.
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Making The Wrong Investments

I can’t stand to see people getting taken advantage of.  I think that I one of the reasons that I decided to stay in insurance and finance even after the market crash of 2008 when it became really hard to make money but you got to see first hand the financial concerns people are exposed to if they are “Ill advised” and there is a downturn in the market.

I few months ago I had an appointment to go through someones health insurance to see if I could save them money.  The first appointment went great and I was very excited to see what I could do for her and her husband.  She mentioned that her mother was a registered representative and that she sold stocks. One of my goals is to make dealing with insurance and finance as transparent as possible.  So I asked her if she would like to bring her mother along on our next appointment and she agreed.

I arrived at Starbucks and her mother was there first and immediately started giving me the third degree; like who I have worked for, who I was contracted with and so forth which is fine.  I am used to that.  But then she asked me if I sold annuities and I said yes.  She said what kind.  I probably should have gotten into how I love the new hybrid annuities that allow you to participate with gains in the market without the risk of loss to accumulate money that would provide the client with an increasing income for life, but instead I just said “I sell all of them except variable annuities.  Her mother explained that she loved selling variable annuities especially to old people.  She said that the selling point was that with the variable annuity if you didn’t use it all, it passed directly to you heirs and the death benefit was tax free and the money bypassed probate (all annuities work like that).  But here is the thing.  Variable annuities are a high risk investment and have expensive management fees so registered representatives like to sell them because they are paid to manage them.

Here is the problem…a variable annuity is not something meant for an older person who is either in retirement or about to retire because you are exposed to market risk and the fees are very high.  Than means if there is a downturn in the market the variable annuity loses principal and if the annuity is being used to provide an income in retirement, your income can be decreased by as much as 40 to 60%.  So I asked her if her clients ever worried about losing money.   She said she when there is a downturn in the market and they lose their money she just tells them “You got hit by a bus” and that it was typical and there was nothing you could really do about it.  If she would have initially asked her client what her risk tolerance was, she may have told the adviser that she didn’t want her principal exposed to market risk. But  I got the feeling that this woman was very good at avoiding and rolling over her clients questions so she could sell her clients whatever she wanted to sell them.  Had the woman known better (client) she would have known that there are other types of annuities that have most of the same benefits that make an annuity attractive but there are safer ones with less fees more suited to someone who is retired or about to retire.  But that is an insurance product and she couldn’t get paid on it so she influenced the women to make a financial decision that was not entirely in her best interest.

All I could think of was that if that woman only knew what her options were and purchased a hybrid annuity, when the market tanked not only would she not lose money, but she would be able to take advantage of dollar cost averaging once the market started going up again and actually have her income INCREASE instead of getting hit by a bus and losing half her income.

That is why it is more important than ever to work with someone you can trust who is going to ask you the right questions as opposed to selling you the flavor of the month stock that they make the most money on.

This may sound kinda corny but that is why I am so passionate about providing people the the information and resources that will allow them to make financial decisions that are in their own best interest.

If you or any one of your family members has questions about their current financial strategy, please feel free to give me a call to go over your planning and make sure it is best suited to navigate the financial landscape of the 21st century and is in YOUR best interest.

With the plans and strategies available today, there is never any reason to expose yourself to getting “hit by a bus” provided you don’t play in traffic.