What accounts everyone should have to save more money?

Savings Accounts

Do you wish you could save more money now?

Have you ever wondered if you have enough money to protect you against financial setbacks or even more, to be able to retire one day?

The only way to save more is to have accounts to hold your savings.

How many accounts do you have to save money?

I am not just counting your bank savings accounts which is probably linked to your checking account.

How many true savings accounts do you have in place now?

One

Two

Three or more

The more accounts you have the more likely you are to save more.

Take a minute to list your savings and do not count your checking account as one. The reason I would not count your checking because if you are saving money in your checking account its likely you will spend it. So if you are using your checking as a savings account stop and open a separate account to save money.

So if you cannot count your checking account and you already have a savings account open, that only one savings accounts.

So what other account can I save money in.

There are other account you can use to save money.

Here are 5 other savings accounts you want to have if you want to save more money:

You may not need all 5 depending on your financial goals and objectives but here is a list of a few you should consider:

Retirement Savings

Retirement savings account should be one account you have in place to plan. It’s one of the easiest to establish since most employers offer some sort of tax-deferred retirement savings account. So it makes it an obvious place to start your savings.

Better yet, most employers usually will help you establish the account when you become an employer of the company it’s not some hidden secret. It’s usually one of the perks of employment, they may even offer you free money to if you contribute up to a certain percentage something you must take advantage of. Your employer will usually provide you with all of the details so you do not have to determine which provider to use.

If you do not have a retirement account established, check with you employer to understand what retirement savings options are available. If your employer does not offer you retirement savings look into establishing a Roth IRA.

Emergency Fund Savings

Unexpected expenses will occur one day. We just don’t know when they will occur. Your car will need a repair or something in your home may need to be repaired. When this happens you probably ask yourself “Where will I find the money to pay for this additional expense?” These sometimes minor expenses can become a financial burden if you are not properly prepared for them.

Having an emergency fund in place can minimize the stress those unexpected expenses can have on you. An emergency fund becomes your safety net to cover those financial shortfalls when the unexpected expense occurs.

Medical Savings

You can put medical cost in the same category as unexpected repairs or emergency expenses. You never know when they will occur but you have to be prepared for them. If not, they may put you into an financial burden.

We all have some form of medical insurance but most medical insurance does not cover 100% of your medical cost. Many medical insurances require an annual deductible which must be meet before insurance covers the cost. So with this said you will probably have some unexpected medical cost throughout the year. You should establish some type of medical saving which would hold enough money to cover your deductible, prescription costs, and co-pays. You can set up a Health Savings Account through your insurance, bank, or even your work.

 College Education Savings

If you have children, you have probably read how education cost continue to increase every year. If you don’t begin to save while they are still young you may have to turn to other forms of financing the cost of tuition. Funding your child’s future college tuition is another easy savings that you should establish. The earlier you begin the less of an impact it will have on your cash flow when your child enters college

 Future Purchases Savings

There are not many things we can guarantee will happen in life. But it’s pretty close to a guaranteed that you will make a large purchase in the future. You are likely to purchase a new car, new home, or other large item in the future. Many times you may make your next purchase sooner than later.

If that is the case, who does not want to already have money saved for this upcoming purchase.

Those are 5 savings accounts you should put in place to help you save more as well as help you be prepared for unexpected expenses and future planned purchases.

 What other savings account can you think to utilize to save more money?

ACTION STEP

If you only have one of these savings account established, put an additional savings account in place so you can save more.  Try to do this within the next 30 days.

Remember take one step at a time to simplify your finances.

Simple Inspiration Interview featuring Free to Pursue

 

Free to Pursue

Have you ever wished you could live the personal freedom you desired?  If you answer is yes you are not alone.  Well this week, I am honored to interview someone who has been able to leave the corporate life and pursue the personal freedom they had desired.  This week Free to Pursue will share how she has simplified her finances so she could enjoy life.  F2P logo_3

The Free to Pursue blog is a site dedicated to living life on your terms. It’s about living an optimal life, which starts with establishing a financial footing that enables you to make life decisions based on your passions and not your obligations.

Let’s hear how Free to Pursue has simplify:

What event lead you to simplify your finances and your life?

I decided it was time to leave my corporate job of over twelve years to increase my personal freedom to do what I want to do, including reading, writing, coaching, traveling and learning more about personal finance and investing.

What area of your financial life needed the most simplification?

My husband and I have no credit obligations, so I would say it would be our retirement planning. We had over a dozen accounts to deal with when we started to consolidate our financial assets.

Where did you begin to simplify your financial life?

The greatest bang for our buck came from being debt free. There is nothing simpler to manage than having no lenders to worry about. I also opened a discount brokerage account and have started transferring our household accounts so that we can manage them all in two places at most and all of it online.

What was your biggest challenge or roadblock when it came simplifying?

Bureaucracy. It’s amazing sometimes how many hoops you have to jump through to consolidate accounts, especially when an institution knows how much money they are giving up as you move on.

What app or tool helped you the most when it came to simplifying?

We’ve used tracking tools such as Mint on and off but what we use most are the tools our online bank, brokerage account and credit card (which we use like a debit card) offer. The tools we have access to from these service provicers are complete enough for us not to have to rely on third party solutions.

How has simplifying changed your life?

With just a few clicks, we can know the status of all our financial assets and make the necessary adjustments.

Are there any areas of your finances that you still need to simplify?

I still need to bring some accounts over to the online brokerage account. Some smaller accounts have just not been enough to bother with but I’m thinking I’ll have those cleaned up this year.

What advice or tips would you give to others who want to simplify their finances?

Just start. If you have debt, start by eliminating one creditor at a time. Each creditor you have is like an extra boss you have to answer to. Just pay off the debt and move on, vowing never to have that boss again.

Then, when it comes to saving and investing, opening an online brokerage account is an easy first step. Check the fee structure because they are not all created equal. Then, they will help you transfer your funds by providing you the necessary forms and steps. The more you do all at once, the more efficient it is.

What book, blog, or podcast would you suggest to someone who is looking to simplify or improve their finances?

I would suggest the following:

When it comes to books (my favorite source) I would recommend:

  • The Millionaire Next Door
  • The Little Book of Common Sense Investing
  • The Lazy Investor
  • Your Money Or Your Life
  • The Wealthy Barber
  • The Richest Man In Babylon
  • Happy Money
  • Scarcity
  • The Total Money Makeover

For money blogs, I like those that offer money and optimal lifestyle advice:

My go to money podcasts for edutainment are:

  • Dave Ramsey

.. and a recent addition is So Money

 Do you have an emergency fund established, if so how did you determine the amount needed to fund it?

We don’t use an emergency fund because we have enough to live on for decades without needing to work at all (though we do keep $10K+ in available cash at any one time, just to make sure we can buy/do whatever we want to do over the shorter term). That being said, I think that everyone, no matter where they are in life, needs an emergency fund, separate from general savings, that is at least 5% of their annual expenses to address unexpected expenses that happen (because life happens). This amount should grow to cover at least 3-6 months of expenses…or more.

How long did it take you to simplify?

Our focus has not been so much on simplifying but on focusing on growing our investments. Simplifying asset management is more of a means to an end. I am still working on streamlining our accounts and expect to finish this year.

What’s your best savings tip?

Pay yourself first. If the money is invested or in a savings account that’s not easy to get to, you’re less likely to spend it.

What are your current financial goals?

We are working on our million-dollar to do list. We want to get to $1M in investments. I wrote about it here: The F2P Million Dollar “To Do ” List

Any other thoughts you would like to share with others who are looking to simplify?

Untangle your obligations by getting out of debt first and foremost, even before you worry about investing. Those are the accounts that come back to haunt us. Having too many savings and investment accounts is a great problem to clean up. Having a growing number of creditors, not so much.

Thanks for provide some good resources and sharing how you have simplified your finances.   If you would like to learn more about Free to Pursue and follow her journey, check out the Free to Pursue also follow her on Twitter @freepursue.

If these interviews inspire you and you would like to read more interviews in the series click Simple Inspiration Interviews.

If you are interested in sharing how you have simplified your financial life, send me an email and I will follow up with you.

Enjoy the rest of your week. Til next time, take one step at a time to simplify.

 

One Simple Step to Simplify Your Finances – Spending

SpendingIn last week’s edition of One Simple Step to Simplify Your Finances mini-series I discussed how having an emergency fund will help you simplify.

Hope you have taken action to fund your emergency fund or if you already had one in place you made sure it was adequately funded.

Now it’s time for another simple step to help you simplify your finances.

As you know there are many things we cannot control when it comes to our finances. For example we cannot control the direction of the stock market, we cannot control interest rates, we cannot control fees, and we can not control those unexpected expenses (the reason you have established a emergency fund). Those are a few things that are just out of our control. That is why I always suggest focusing on those things that you can control.

One of those things that you can control that can have a positive or negative impact on your personal finances is your …..

 

Spending

 

You have probably heard the term spend less than you earn. If you want to grow your wealth and simplify your finances you must be able to control your spending. Its one thing you actually have control over and will have a significant impact on your financial situation.

You hear this often but many people are unable to get a handle on their spending.

How can I begin to spend less?

Its not always as easy as it sounds.

How to Control Your Spending:

Create a budget

You may not like to budget because it takes too much time or makes you feel restricted. I can tell you this if you don’t know how much is coming in and going out each month you will not be able to simplify your finances.

A budget is basically an anticipation of your monthly income and expenses. Here are several reasons why you must create a budget as soon as possible to make you financial life easier and help get your spending under control.

Know where your money is being spent
A personal financial budget allows you to know where the inflows and outflows of your money come from. It puts you in control of your finances instead of letting your finances control you.

Helps you achieve your financial goals
A budget is your road map to help you achieve your financial goals.

Helps you determine your priorities
Creating a budget allows you to see where your money goes as well as lets you know what your real priorities are. For example, you may say you want to save more for retirement however instead of saving this money for retirement you are spending it on other things.

Know your Financial Habits

Think about your financial habits. The good ones you have developed as well as the bad ones you may have. In order to simplify you have to develop good financial habits and eliminate the bad ones. Yes, I know it is easier said than done. Trust me I know. We all have some bad habits that can be a challenge to eliminate. So take some time to identify your financial habits – the good and the bad. Identifying your financial habits will help you on your journey to control your spending as well as help you to simplify.

If you are serious about establishing a simplified financial lifestyle make sure you know where you money is spent on a monthly basis.

Benefits of Controlling your Spending

More to save.

If you are not spending your money that means you will have more money to save. Saving enables you to have more to allocate to your emergency fund as well as your retirement. Having both of these in place will provide you with an financial peace of mind when those unexpected expenses occur as well as when it’s time for you to retire.

Less stress

Spending less enables you to save more which leads to reduced stress. You have less stress because you know your emergencies are covered, your retirement is being planned and money is set aside for those future purchases. You will sleep better, your overall financial and physical health will improve.

Helps Eliminate your debts.

Maintain control of your spending frees up money which you can use to reduce your debts. Also if you are spending more than you earn you are probably using credit card to make those purchases which increases your debt.

So take some time to review your monthly spending. You maybe surprised how much you are spending and may discover a few ways to reduce it.

It is one of the things you actually can control so manage it properly. Less spending means more saving which will lead to financial peace of mind.

So stop spending and start saving.

Now you must take action by reviewing your spending. Look for ways to reduce your spending.

  Are you ready to begin simplifying now?

If so, sign up for my newsletter and you will receive a weekly email to help you simplify as well as receive a free eBook which provides you 9 simple steps so you can simplify your finances with in 30 days. Sign up now by entering your name and email address below.

Til next week take one step at a time.

Next week I will provide another simple tip for you to implement.  So stay tune and sign up for newsletter so you don’t miss any of these tips.

 

 

 

Simple Inspiration Interview featuring C.J. Carlsen

 

Path to Financial Freedom

 

I am pleased to have the opportunity to interview C.J Carlsen from The Path to Financial Freedom for this week’s Simple Inspiration interview.

He blogs at ThePathtoFinancialFreedom.com which he posts about the principals of personal finance and investing, to help his readers realize their dream of financial freedom.  He also take the time to post about his progress on this journey. In addition, he has written five books with more to come.  You can see all of his kindle books which are on amazon.

Here are his five books:

Broke Brain

Everything You Need to Know about Personal Finance in 1000 words

Get Rid of Debt Forever

The College Tuition Riddle

Grow Your Own Money Tree

Let hear how C.J. has simplified his finances:

What event lead you to get your finances in order on the path to financial freedom?

I’m not sure if I could put my finger on one specific event. I have always been frugal and responsible with my money and made sure I wasn’t wasting it on anything silly.
But, if I had to pick just one event, it would be the day I started my first job after graduating college. I made more money in a month than I used to make all summer working as a landscaper. I had all of this cash and didn’t know what to do with it.

I started saving it up and keeping it in my bank account but other than that, I just let it sit there. I finally got to the point where I realized I needed to do something with this money. I knew just letting it sit there wasn’t doing me any good.

As a result, I committed to learning as much about personal finance – including budgeting, saving, and investing – in order to handle my money the best way possible.

What area of your financial life needed the most simplification?

Of all the areas in my financial life, the one I needed to work on simplifying the most was investing. This was one area that I really enjoy doing, but it was just taking up too much of my time.

When I first started out I wanted to know everything about investing in the stock market. I was under the impression that I had to pick my own stocks and try to beat the market.

I quickly realized how time consuming this task was. I began to read more about investing and learned that a majority of investors fail to beat the market. During that same time, I read about low-cost mutual funds and exchange traded funds. This shifted me away from picking my own stocks and instead I focused more on simplifying my investment approach.

Where did you begin to simplify your financial life to get on the path of financial freedom?

I had already been investing in my company’s 401(k) plan. The next logical step was to begin investing in a Roth IRA.

So I set up my Roth IRA, and I had it set up so that every month it would take money from my bank account and deposit it into my Roth. This made investing simple and automatic. Now I don’t even have to think about contributing to my IRA, the work is all done for me!

What was your biggest challenge or roadblock when it came simplifying?

The biggest challenge for me was adjusting to a hands off approach to investing. I believed that I had to micromanage my investments when I initially started; however, this new, hands off approach was a complete 180 from those original thoughts. I like to have control over things, and setting up my account so that investments in mutual funds are made automatically was foreign to me.

This brings up an interesting quote that I read in “The Intelligent Investor” written by Benjamin Graham which discussed the defensive approach (or hands off approach):

Charles Ellis has explained, the entreprising approach is physically and intellectually taxing, while the defensive approach is emotionally demanding.

It can be emotionally demanding at times using this hands free approach to investing. I’m still adjusting to this approach, but I am glad I have done so because it helps free up my time to pursue other opportunities.

What app or tool helped you the most when it came to simplifying?

The most helpful tool that I have found is using automatic investments on my retirement accounts. As I said earlier, the 401(k) contribution is automatically taken out of my paycheck every month. I set up automatic investments with my brokerage, Vanguard, to move money from my bank account to my Roth IRA every month as well.

This tool helps me ensure that I continue to put away money every month into my retirement accounts. Because I don’t even see the money hit my bank account, I don’t miss it when it is transferred to my retirement account. It helps maintain the habit of saving and paying myself first, and then spending whatever money is leftover on whatever I choose.

How has simplifying changed your life?

By simplifying my investments, I now have more time to pursue other opportunities. I can blog more frequently and most importantly I have started writing personal finance related books to help others get their money in order.
I am able to do this because I am not researching stocks constantly and tracking my portfolio religiously. As much as I enjoy playing the stock market, it is very time intensive if you want to succeed. My time is better utilized elsewhere, helping others get a grip on their finances, and I feel more accomplished at the end of the day.

Are there any areas of your finances that you still need to simplify?

I feel like I do a pretty good job of simplifying my finances for the most part. I have made saving a high priority in my life.  I use my credit cards regularly but always make sure I pay off the balance in full every single month to avoid any interest charges – which I have done by setting up automatic payments on my credit cards as well.

While I feel like I have done well, I am always looking for ways to improve and make my finances even simpler!

What does financial freedom mean to you?

Financial freedom to me is having enough money to live off of without ever having to work again. This does not mean you never have to work again. Instead it means that you work on your own terms.
You never have to worry about the stress of losing your job. You don’t have to worry about whether you have clients or not. When you are financially free, work no longer becomes a requirement in life but rather a choice.
I have made a couple of blog posts that go into more detail regarding financial freedom.

Here are the links to these financial freedom post:

What is Financial Freedom?

23 Rules to Achieve Financial Freedom

What advice or tips would you give to others who want to simplify their finances to get on the path of financial freedom?

The most important advice I would give to someone to simplify their finances would be to set up automatic payments on everything they can.
This would include student loans, credit cards, electricity payments, and rent if possible.

It can be so easy to overlook payments every month. As you get older, you have more and more bills to juggle every month. Even missing just one bill could end up costing you $20 or $50 because of late fees.
Another piece of advice would be to pay yourself first. This advice goes back to George Clason’s classic book, “The Richest Man in Babylon,” and is still relevant today.

You can pay yourself first by setting up automatic deposits for all of your retirement accounts, including your 401(k) and Roth IRA.

The reason this works is because you make saving for yourself the number one priority. The reason I love this is because it combines the habit of saving, investing, and simplicity all on one.

If someone wants to begin the process of financial freedom where do you suggest someone should start?

I recommend they start from the bottom. The best way to start is for them to educate themselves by reading various books related to personal finance and other money matters.
For me personally, some of the most influential books that I have read are:

• “Rich Dad Poor Dad” by Robert Kiyosaki
• “I Will Teach You to Be Rich” by Ramit Sethi
• “Think and Grow Rich” by Napoleon Hill

These are a few books which have helped open my eyes and encouraged me to improve my finances.

Next I would recommend they have a deep understanding of why they want to improve their finances. Then create goals for their finances, and reiterate those goals each and every day.

As far as actionable advice, for beginners I would recommend that they pay down all of their credit cards and build up an emergency fund.

Once this is complete, set up retirement and investment accounts and deposit money into these accounts every month.

And finally, invest in yourself. Never stop learning. Read books, blogs, articles, watch videos, and develop connections that can help you accomplish your goal of financial freedom.

What book, blog, or podcast would you suggest to someone who is looking to simplify or improve their finances?

If I had to pick one book for someone looking to simplify their finances, I would recommend “I Will Teach You to Be Rich” by Ramit Sethi.

This book really helped open my eyes about how I could put my finances on cruise control. It has a ton of actionable information which you can put into place today, and is a great place for someone who is just starting out.

 

Thanks C.J.  I appreciate you taking your time to sharing how you have simplified your finances and offering some tips and resources on how others can simplify as well. If you would like to read more post from C.J., visit his blog The Path to Financial Freedom or follow him on Twitter @financiallyfree.

To read previous interviews in the series click Simple Inspiration Interviews.

If you are interested in sharing how you have simplified your financial life, send me an email and I will follow up with you.  Enjoy the rest of your week. Til next time, take one step at a time to simplify.