Posts Tagged ‘ financial planning ’

Many women decide to stay home after they have a child. Their husbands become the primary breadwinner and they manage the home – from doctor appointments to finding the right pre-school for their children. Unfortunately many women choose not to manage the investments and important financing decisions. Many pay the household bills but likewise many allow their husbands to invest the family savings ranging from life insurance, annuities, IRA’s, 529’s and 401 (k)’s.

If a divorce occurs and the wife has not been involved in these important financial decisions it can be a steep and daunting learning curve.

Managing your budget and your savings is critical. Many Americans live close to the monthly paycheck so if a situation happens, such as your car breaking down, it can stress your savings or worse, can put you into an impending “insolvency event”.

It is important to understand your financial situation – so start now. Go through all your financial records and set up a filing system that works for you. If you are comfortable with Excel put a spreadsheet together. Once you have determined what is going out, what is coming in and what is being placed in savings instruments you can put together a comprehensive budget.

If you are not saving, reassess your lifestyle and make the necessary cutbacks and adjustments. If you are saving, determine whether it is enough to cover your retirement years and pay for your kids’ college education (or at least a portion of their college).

It may seem overwhelming, especially having gone through a divorce. There are a number of sites and networks that can help you get started and encourage you along the way. It is well worth the investment of your time.

Sometimes really smart people do things which, well, aren’t so smart. Here are a few common examples of how some people throw away money.

Fund your 401(k) - at least as much as is matched by your employer
If your boss offered you a $3,000 raise, what would you do? Turn it down? Say “no thanks”? If you’re not taking advantage of your firm’s 401(k) matching program, that’s exactly what you’re doing.

Many corporations that offer 401(k) plans will match employee contributions up to a certain level. This is free money!!!! Granted, you don’t have access to your money until retirement age without paying a penalty, but still – It’s free money!

As an example, let’s say your salary is $50,000 a year and your employer matches your 401(k) contribution up to 3% of your salary. That means if you invest 3% or your salary, or $1,500, in your 401(k), your employer will also contribute $1,500 – Free money!

If ever there was a good reason for living below your means, this is it. Cut down on your expenses so that you can contribute the maximum amount matched to your 401(k). Hopefully, you can fund your 401(k) even more, to the maximum amount allowed by law. But put in at least as much money as your employer will match. After all, you wouldn’t turn down a raise, would you?

As the year ends and we frantically find all our co-pays for doctor’s offices, miscellaneous drug store receipts and bills from medical labs, it reminds us that putting aside money for these medical expenses was a good idea. 

If you have the opportunity of being offered a Flexible spending Account by your employer its worth looking into as long as you reconcile before the year ends – you don’t want to lose the money you have set aside. 

Flexible Spending Accounts are a way of setting aside pretax dollars in your account and using the money to pay for out-of pocket bills – these can include myriad items including braces for your kids, dentistry, prescription drugs, medical alert jewelry and many other items. Depending upon your needs you can even put in for acupuncture – but verify with your provider first.

When you next check out at Walgreens or Duane Reade look at your receipt. If there is an F beside an item – such a cough medicine – it means that the purchase on this item is eligible for your Flexible Spending Account – with most programs.

The accounts can save you hundreds of dollars, not just in federal taxes, but also in Social Security and, in some states, state income taxes. If you have kids and therefore run up some hefty bills, putting aside $1,500 could save you around $500 a year. The $1,500 is taken out of your paycheck (before taxes) over the year however you can apply your doctor visits, prescription drugs etc to the account and it will be deducted from your continuing contributions. But be sure to use up the money because it is a use it or lose it program. Most companies give you a few weeks in January (some even through March 15th) to find all those bills and fax them in to the provider.

However, if you find you have not used up all the money you elected to have set aside from your paycheck, you can always schedule an eye examination and purchase new eyeglasses – that’s more than likely to put you over your allotted contribution!