Monthly Budgeting and Long Term Savings Advice

Monthly Budgeting and Long Term Savings Advice

Budgeting is often one of those ‘chores’ that get procrastinated, require some sit down time, commitment, and research. It also means major ‘adulting’, because it requires us to think about the future and all our responsibilities.

Michelle, a CFP (certified financial planner) and senior wealth and financial advisor, and host of the $mart Women Invest podcast, says “think of budgeting less as a ‘requirement’ and more as a way to achieve your goals”.

Tips for maintaining and organizing your monthly budget?

Michelle advises to keep thinking of those goals and rewiring your view on your financial priorities. For example, Michelle’s personal “goal of having $500k saved by age 40", means that when she opts to take the subway rather than a cab or Uber in NYC, she is thinking “less about depriving myself and more about how this decision will help me reach my goal”.

It’s about “being in control vs feeling required to do something”
— Michelle, Certified Financial Planner

“The goal can be a fabulous ski trip to Europe, a new property, or just a savings goal.  Up to you” Michelle says. End goals and exciting things to save up for are a good motivation, but everything is subjective and personal. For some, just a simple savings plan and the end number is exciting. #youdoyou

I think adapting this mindset even for the ‘less exciting’ responsibilities or commitments we are saving up for, allows us to think of a goal to reach. Followed by the thought that once we pass the point of only saving up for that commitment, we can work towards saving for something we can enjoy, or pamper ourselves with.

Credit: Gina Lombardo Media, Index Finger Ring: Aaryah Jewelry

Credit: Gina Lombardo Media, Index Finger Ring: Aaryah Jewelry

So how do you know how much to save every month?

Yes, this is subjective. On a general bases, though, you want to know what you’re saving for. Michelle advices “I would suggest a monthly savings goal versus a year goal because the monthly makes you more accountable”. If you get a yearly bonus, then “make sure the moment you get your bonus, you move x amount into your savings”.

Some pointers from the conversation with Michelle:

  • Timeline (its all about the timeline).

  • Consider what the investment vehicle is for the certain savings (e.g. wedding or rainy day fund will partially be cash).

  • Emergency funds should be in cash.

  • Good rule of thumb is 3-5 months worth of expenses to have in cash.

  • 30-40 years from retirement? you need to be aggressive.

We suggest listing out the things you are saving for, from retirement, to the outfit you want to buy in a coupe weeks, the gifts you need through the year, the trips you want to make, the charity you want to donate to, etc. and assign a spending limit for each item/cost.

Credit: Gina Lombardo Media

Credit: Gina Lombardo Media

Once you have a number for each item, then divide out the amount by the number of months you have to save up for it. Perhaps you keep one goal to start half way through the year, not now, but the other 3 items you start from this very month. 

A great cushioning for your spending and savings is to have your rainy day fund (for future emergencies, and then a small spending amount for every week or every month that you can pull out from when you want to treat yourself or a loved one. This means you can splurge, even if it’s $10 without taking from your everyday spending or larger savings.

This post by Ben Henry-Moreland, a financial planner focusing on freelancers, advices on saving for retirement according to your income, if you are in charge of your own retirement plan (freelance).

Mid way through your career

You should check in on these things include making “sure you’ve sat down with an advisor” says Michelle, or using an “online program that models our your future goals and what you need to save”. You definitely “you do not want to wake up at 50” and realize you need to start saving for retirement. “Time is on your side if you start now.”

When talking to an employer about your finances

Michelle reminds us its always advisable to “ask your employer if they match your 401k contributions (assuming you are in the US) because that is free money!”. If you are not in the US, consider whatever retirement plan your government offers, or if you are creating your own, then fall back on the rest of the advice (and the freelance link shared above) in this post for tips.

“Regarding savings accounts, make sure you ask your bank if there is an account option that pays a higher interest rate. Short term rates have risen dramatically and you should be able to get more than 0.01%” Michelle advises.

If you are interested in investing - which isn’t the worst idea! - we asked Michelle for some starter tips.

“If your horizon time is more than 10 years, always think more aggressive”

“If you are 30 and saving for retirement you need to be heavily invested in the equities markets (i.e. stocks).

“No amount is too small to start investing with. Companies like Vanguard, Fidelity, Wealthfront etc have democratized the ability to invest, which is awesome. So take advantage! ”.

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