Today’s article, titled, How much should I save?by Donna Rosato, is an in depth look at an entrepreneur and her retirement portfolio.  The entrepreneur is hoping that a financial planner who looked at her portfolio will “bless it” and tell her good job.  Unfortunately, like most people, she isn’t saving as much as she thinks she is!  Most people think that by saving anything, or by getting their “company match” in a 401k program that they are set for retirement…they’re not.  Yes, it is good to get that company match, but if that is ALL you’re saving, you won’t be able to retire with the same lifestyle you have now, and that is where the misconception comes in for a lot of people.  They think, “oh, well, as long as I get my company match, I can retire living at the same level I live at right now”.  WRONG!  If it were that easy, we’d all retire with no debt and a vacation condo!!  As the financial planner in the article figures out, the entrepreneur is saving less than half of what she needs to retire at her current lifestyle level. 

What is going on here?  As adults, we underestimate things…it’s what we do.  For example, we underestimate the amount of calories we take in in a day (to the tune of 20%-40% from what I have read) and we underestimate how much we should be saving.  So, how do you keep from underestimating things?  Get some help!  You can pay for it, or get the free kind.  Either will be better than nothing, but if you’re paying for it, be sure that the expert isn’t just trying to sell you products…if they are, then they DO NOT have your best interests in mind!  Need some basic (and free) ideas on how much you should be saving?  Check out this link at CNN Money, to get a rough idea of where you are and what you need.  Some extra tips are to be diversified, preferably in growth stock mutual funds, and, the article and I agree, that small cap, mid cap, large cap and international funds are all good places to invest your cash.   Whatever you do, figure out what you need to retire.  Don’t just think that a 6%-8% contribution to your 401k is enough.  Max it out!!  Start contributing to a Roth IRA!  HAPPEN to your life…don’t let your life HAPPEN to you!!!

This is one of the most ridiculous things going on in our society right now.  I cannot believe that Boomers are giving so much to their grown, totally able to work (even if that job is “beneath them”) adult children.  I mean, come on…so what if the job doesn’t pay $100,000 a year with nice perks etc.  There is value in being able to say you are making it on your own.  Let’s break down that number above…$59.000 in 5 years is roughly $12,000 a year, or $1,000 a month!  That is a part time job!  You want that lifestyle?  Don’t get it from your parents, who would like to retire soon!

The bottom line is this:  If you’re a Boomer and are looking at your retirement nest-egg, realizing that retirement is going to be tough (if possible at all now or in the future), then you need to evaluate where your money is going.  If, that money is going to your children, it is time to cut them off!  They can have what’s left when you’re gone (if anything) and do what they want with it at that time.  Why would you risk your livelihood on their new car/home improvement etc.?  Teach them the hard lesson that sometimes you have to take care of yourself.  They will have to learn that lesson when you’re gone anyway, and it will be easier if they have your shoulder to cry on when they learn that lesson.

Are you the child of a Baby-Boomer?  Do you “borrow” money from them that you never pay back?  Perhaps it’s time for you to realize that you’re draining their retirement money, and that you need to grow up and pay your own way.  Nowhere in the “how to be a parent” handbook does it say that your parents are responsible for paying your way from birth to YOUR retirement!  Cut them a little slack!  If you can’t live without all of those nice things that you’re buying with their money, get a part time job…otherwise, perhaps it’s time you learned to live within your means!

The article centers around Chad and Stephanie Grant, from San Diego, who are both 31, have been married 7 years and are starting a family.  They make a very good living, with a nice nest egg already started, but not a very big emergency fund.  The article points out that they have a few actions to take to be ready for baby.

If you are in the same situation, trying to start a family, I have a few tips:

• You MUST have an emergency fund of AT LEAST $1000, but preferably 3-6 months worth of expenses.
• It’s a good idea to find out what the total cost of doctor visits and delivery will be and save that amount (or as close to it as you can) to pay cash for your baby when it’s born.  It’ll be nice not to finance your child, right?
• Now is the time to get diversified, as the article points out.  Make sure you don’t have all of your retirement “eggs” in 1 basket.  You should diversify between small, mid and large cap funds, and international funds.
• Insurance!  We all know that health insurance is important, but life insurance is equally important when you are starting a family.  If you die, something has to replace your income!
• A Last Will and Testament is important for you and your spouse, but when you have a baby, it’s IMPERATIVE.  If you don’t have a local lawyer, or don’t have the cash for a lawyer, then go to USLegalForms.com and do it yourself on the cheap!
• And, of course, stock up on diapers (or ask for gift cards to buy diapers)!

That’s it!  Check out the article, and use these tips to get you on track, if you aren’t already!  Good luck, and I look forward to your questions and comments!

First let me say that you should keep in mind that this data reflects only one month, and that it could just be a fluke. I know that the unemployment rate has gone down slightly, and that demand for houses has gone up, but honestly, so what! Just because the economy might be showing signs of improvement does not mean you should forget the lessons you have learned over the last several months in ways to save money and spend less. One of the reasons that people have gotten into trouble with money over the years is that they spend all that they have, or more than they have and don’t save enough for their future when they retire, or, just as bad, save for when their income is lost/interrupted, so that they have no emergency fund.

Deep down, I’m hoping that spending rose because we are in “back to school” season, and parents were spending money on their little ones clothes, crayons and paper, but I just don’t know. Americans tend to have what I think of as collective ADD, where, as a nation, we can’t keep our “eye on the ball”. When something loses its luster or lasts too long, we tend to get bored, and I think that the recession has reached that point. I ask all of you to keep your focus, save your money and spend less.

Brief summary: An ad agency in Finland has started running an “evil piggybank” ad encouraging people to spend money, while here in the U.S. we have the “feed the pig” commercials encouraging people to save money.

This article is interesting because it brings up a good point…should I save my money in a down economy, or go spend some to help the economy recover? Well, I say save what you can. Here’s why…

The Finns are trying to stimulate their economy by having their citizens spend all they can, but that is part of what got us Americans in trouble in the first place. We didn’t save, we just saw what we wanted (instant gratification) and bought it, usually on credit. This is proven by the fact that 2 years ago Americans were spending 2% more than they were earning…that’s right, we were saving NEGATIVE 2% of our incomes…awesome, huh? That figure has jumped to POSITIVE 2.5%, but that still isn’t enough.

I love that the feedthepig.org organization is trying to encourage people to save…I think it is exactly what we need to be doing right now, and so does the expert from the article, Kent Smetters. Smetters says we should be saving about 10% of our incomes, and Jerrill and I agree with that percentage, as long as the person has the added protection of an emergency fund of at least 3 months expenses ($1000 emergency fund to get started).

So, you might be asking yourself why in a time of economic downturn do we think you should be saving money? Well, we figure it’s covered. Think about it…you still buy your groceries, pay your electric bill and mortgage payment (hopefully), so the only thing you’ve cut back on are the $6 coffee and designer handbags. Well, the truth of the matter is that if you had to put those items on credit or had to cut back on them first, you probably couldn’t afford them anyway. But that’s OK, not everyone can afford those things. That is the way of the capitalist system…it only guarantees you the opportunity to earn enough to have the finest things, it doesn’t guarantee you the finest things. and don’t worry that no one is out there buying things and stimulating parts of the economy other than groceries and electric bills. There will always be people who can afford to have finer things, and they will by these things even when there are economic woes.

So, save your money. Pay attention to what we say and those Feed the Pig commercials. Don’t pay any attention to the Finnish commercials…we tried over-spending already, and look where it got us!

I have been thinking about what all of the unfortunate people in the state are going through. My 2 best friends both lost power. One for 2-3 days, and the other has been without power for 9 days and counting. Your southern couple was lucky this time. We never lost power or cable, and didn’t have any trees fall on us or our house.

But the people who were impacted by the storm…what about them? They are paying for hotel rooms while their homes have no power. They are paying for arborists and electricians and possibly roofers to fix the problems caused by the weather. They are out hundreds (thousands?) of dollars to get their lives back in order. Could they afford it?

As our readers know, we are BIG supporters of having a rainy day (in this case icy day) or emergency fund. We think that having a reserve of money for life’s little eventualities (or Mother Nature’s tantrums) is a top priority. We do not believe in putting emergencies on credit cards, because MOST people don’t pay off their credit cards. If these people had or have emergency funds, then they could just pay cash for the repairs or hotel rooms and not worry about where they will get the money. Living in a hotel room for 2 weeks is stressful enough without the stress of figuring out how to pay for it.

So, were our fellow citizens prepared? We hope they were, but we obviously don’t know.

The lesson to take away from the last 2 weeks however, is that disasters are only disasters if we are not prepared for them. Keep an emergency fund of at least $1000. Don’t think that it could never happen to you. Don’t let your life impact you…impact your life!