A Budget Can Help You Meet Your Retirement Goals

By Clifton Linton
Writer, mPower

In this article Record Your Spending Set Your Goals Reach Your Goals Make Your Budget Work And Save For Retirement

Every night when Peter Schoenke gets home from running his Web site, he logs on to his computer and enters his daily expenses into the budget program.

This tool helped Schoenke, 29, stay on sound financial footing as he poured much of his money into building his sports statistics Web site. Now that the site is up and running, he's using his budget to help save for retirement and buy a house.

"The big thing (the budget) helped me do is figure out my bare-essentials" costs, he said. "If I needed a capital outlay, I could dive in my personal account and find out if I had enough to cover my costs," Schoenke said.

You, too, can use this simple tool to help you plan for retirement, pay off debts and still have money left over for a few luxuries. Just remember that creating a budget and sticking to it takes a little work.

Record Your Spending

Before you create your budget, you need to know two things: how much money you have coming in and how much you spend.

Most folks know how much they pay for rent or mortgage, insurance, and car payments. What they don't know is where the pocket change goes.

"If your spending habits are not conscious, they are habits. We do things without knowing why we do them," said Diane Savage, a certified financial planner and retirement consultant with Watson Wyatt Worldwide.

To get started on your budget, try this exercise. For one month, record everything you spend, from a 5-cent piece of gum to a new pair of shoes. You don't need a fancy computer program like Schoenke uses -- you can keep track of spending in a low-tech notebook. And there's no use conveniently "forgetting" to enter a purchase, because you'll only be lying to yourself.

Set Your Goals

At the end of the month, tally up your expenses and see where your money went. You may be surprised.

Paul Hrisko, a certified financial planner, said one client and wife discovered to their astonishment that they were spending $1,500 a year on cigarettes. They didn't quit, "but, they cut back knowing that they had more discretionary income if they did," he said.

Suppose you buy a $2.50 latte every workday. Did you realize that you're spending $50 a month or, $600 a year, on lattes? If you only bought a latte every other day, you'd have $300 to spend on something else.

"It's hard to create a budget if you don't know what your goals are." - Lorayne Fiorillo Author "Financial Fitness in 45 Days The Complete Guide to Shaping Up Your Personal Finances."

Now's the moment when you need to closely examine your habits and decide if you want to keep or change them.

"It's hard to create a budget if you don't know what your goals are," said Lorayne Fiorillo, author of "Financial Fitness in 45 Days, The Complete Guide to Shaping Up Your Personal Finances."

Here are some goals to consider:

1. Pay off debt

If you're like many Americans, you may be struggling to pay off credit card debt. Unlike the interest on a home mortgage, there's no tax deduction on credit card debt. Plus, credit-card rates are sharply higher than home mortgage rates.

Paying debt off should be one of your first goals, Savage says. "Debt is very powerful. It's the enemy of saving," she said. "It makes the concept of getting ahead difficult to imagine."

2. Save for retirement and emergencies

Think about funneling 10% of your income into all savings, urges Carmen Petote, a certified financial planner with Pittsburgh-based Allegiance Financial Advisors Inc.

He recommends saving enough money to cover three to six months of expenses. That's your emergency fund to carry you through in case you lose your job, or the water heater blows up at home.

Once you have that money set aside, you can plan to save for other things like a child's college education and retirement.

How To Reach Your Goals

Once you know your goals and budget, you're in the driver's seat, Petote says. "When you have a budget, you take the blinders off. You have control over where your money's going," he said.

Your ability to succeed doesn't depend on the amount of money you make but on your attitude, Savage says.

"Saving is a habit. If you don't save on a $20,000-a-year salary, you won't save on a $250,000-a-year salary." - Diane Savage Certified financial planner and retirement consultant Watson Wyatt Worldwide.

"Saving is a habit. If you don't save on a $20,000-a-year salary, you won't save on a $250,000-a-year salary," she said.

That said, it can be tough to stick to a budget. Here are a few tips to help you.

Create a plan you can live with.

One reason people fail to stick to a budget is they set overly ambitious goals they can't meet. When they fall short of their goals, they feel like failures and abandon the budget.

But Petote said you shouldn't feel like a failure if you can't meet your goals. Instead, try revising your goals to a more realistic level. Also, accept that you may slip in your discipline now and then. That doesn't mean you've failed in your plan.

"Nothing's worse than having a plan with which you can't live" - Paul Hrisko Certified financial planner.

"Nothing's worse than having a plan with which you can't live," Hrisko said.

Indeed, when Schoenke needed to buy a new server for his Web site a few years ago, he was able to afford the $10,000 price tag by dipping into funds he had already saved, and by trimming back on extras like eating out, going to movies and vacation travel.

"Since I've been an entrepreneur, I know what my threshold of pain is," said Schoenke, who is single.

Since his early austere days, Schoenke has sold his Web site, but he remains its president. Still a big saver, he socks away the full amount into the company 401(k) plan.

Start saving small but early

When Dominic Wroblewski, 40, gets hold of a penny, he pinches it so tightly that Abe Lincoln cries. For 22 years, he's religiously used a budget to save for all of his fixed expenses, as well as luxuries such as model railroading, photography and entertainment.

"(My parents) taught me…the money goes in but it never comes out." - Dominic Wroblewski Budget devotee.

His Depression-era parents drilled their banking philosophy into him, he says. "The money goes in but it never comes out," he said.

The key is not the amount you are saving, but the fact that you are saving, Hrisko says.

For example, if a client wanted to save $300 a month for retirement -- quite a big chunk all at once -- Hrisko said he would urge the client to start lower, perhaps $100 a month, and work up to the higher amount.

"That money continually goes into savings and continues to grow," he said. "My clients say they never realized how (it) can grow. Then it (realization) kicks in and they are looking at other ways to reduce expenses."

Tips to Make Your Budget Work And Still Save For Retirement

• Shoot to save 10% of your income for retirement. If you can't afford 10%, try a smaller amount. The key is to get started, Petote says.



• Put money in your savings accounts using an automatic deposit system. With this system, saving for retirement becomes like paying a monthly bill. In essence you're making yourself a creditor.

• Start saving early. If you're young, the one thing you have working for you is time. Say at age 25 you started saving $2,000 a year until age 35 and then stopped. By the end of those 10 years you would have $37,062. By age 65, assuming a 10% return, you should have $646,726. If you started saving $2,000 a year at age 35 and continued to add another $2,000 a year until retirement you would only end up with $363,886.

• Create a slush fund so you don't have to cut yourself off cold turkey from little indulgences like new shoes or collectible toys. Wroblewski, an operations manager for a commodity trading firm, sets aside a modest amount each month to spend on his "weaknesses," photography and model railroading. "You will hate it at the beginning. … (But) as time goes on it will pile up," he said.



• Get rid of your ATM card. It provides ready access to cash, which can result in undisciplined spending. "You want to save money? Then kiss your ATM card goodbye," Fiorillo said. "Holding an ATM card out is like giving chocolate to a chocoholic."



• Look at your income tax withholding. Don't have the IRS withhold more money than necessary just so you can get a refund, Fiorillo said, because that means you're essentially giving the federal government an interest-free loan. "You are doing Uncle Sam a favor and he doesn't even write you a thank you note," she said.



• Take half of any raise or bonus and put it into savings, Fiorillo urges. Have fun with the other half.

The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.

A Budget Can Help You Meet Your Retirement Goals

By Clifton Linton
Writer, mPower

In this article Record Your Spending Set Your Goals Reach Your Goals Make Your Budget Work And Save For Retirement

Every night when Peter Schoenke gets home from running his Web site, he logs on to his computer and enters his daily expenses into the budget program.

This tool helped Schoenke, 29, stay on sound financial footing as he poured much of his money into building his sports statistics Web site. Now that the site is up and running, he's using his budget to help save for retirement and buy a house.

"The big thing (the budget) helped me do is figure out my bare-essentials" costs, he said. "If I needed a capital outlay, I could dive in my personal account and find out if I had enough to cover my costs," Schoenke said.

You, too, can use this simple tool to help you plan for retirement, pay off debts and still have money left over for a few luxuries. Just remember that creating a budget and sticking to it takes a little work.

Record Your Spending

Before you create your budget, you need to know two things: how much money you have coming in and how much you spend.

Most folks know how much they pay for rent or mortgage, insurance, and car payments. What they don't know is where the pocket change goes.

"If your spending habits are not conscious, they are habits. We do things without knowing why we do them," said Diane Savage, a certified financial planner and retirement consultant with Watson Wyatt Worldwide.

To get started on your budget, try this exercise. For one month, record everything you spend, from a 5-cent piece of gum to a new pair of shoes. You don't need a fancy computer program like Schoenke uses -- you can keep track of spending in a low-tech notebook. And there's no use conveniently "forgetting" to enter a purchase, because you'll only be lying to yourself.

Set Your Goals

At the end of the month, tally up your expenses and see where your money went. You may be surprised.

Paul Hrisko, a certified financial planner, said one client and wife discovered to their astonishment that they were spending $1,500 a year on cigarettes. They didn't quit, "but, they cut back knowing that they had more discretionary income if they did," he said.

Suppose you buy a $2.50 latte every workday. Did you realize that you're spending $50 a month or, $600 a year, on lattes? If you only bought a latte every other day, you'd have $300 to spend on something else.

"It's hard to create a budget if you don't know what your goals are." - Lorayne Fiorillo Author "Financial Fitness in 45 Days The Complete Guide to Shaping Up Your Personal Finances."

Now's the moment when you need to closely examine your habits and decide if you want to keep or change them.

"It's hard to create a budget if you don't know what your goals are," said Lorayne Fiorillo, author of "Financial Fitness in 45 Days, The Complete Guide to Shaping Up Your Personal Finances."

Here are some goals to consider:

1. Pay off debt

If you're like many Americans, you may be struggling to pay off credit card debt. Unlike the interest on a home mortgage, there's no tax deduction on credit card debt. Plus, credit-card rates are sharply higher than home mortgage rates.

Paying debt off should be one of your first goals, Savage says. "Debt is very powerful. It's the enemy of saving," she said. "It makes the concept of getting ahead difficult to imagine."

2. Save for retirement and emergencies

Think about funneling 10% of your income into all savings, urges Carmen Petote, a certified financial planner with Pittsburgh-based Allegiance Financial Advisors Inc.

He recommends saving enough money to cover three to six months of expenses. That's your emergency fund to carry you through in case you lose your job, or the water heater blows up at home.

Once you have that money set aside, you can plan to save for other things like a child's college education and retirement.

How To Reach Your Goals

Once you know your goals and budget, you're in the driver's seat, Petote says. "When you have a budget, you take the blinders off. You have control over where your money's going," he said.

Your ability to succeed doesn't depend on the amount of money you make but on your attitude, Savage says.

"Saving is a habit. If you don't save on a $20,000-a-year salary, you won't save on a $250,000-a-year salary." - Diane Savage Certified financial planner and retirement consultant Watson Wyatt Worldwide.

"Saving is a habit. If you don't save on a $20,000-a-year salary, you won't save on a $250,000-a-year salary," she said.

That said, it can be tough to stick to a budget. Here are a few tips to help you.

Create a plan you can live with.

One reason people fail to stick to a budget is they set overly ambitious goals they can't meet. When they fall short of their goals, they feel like failures and abandon the budget.

But Petote said you shouldn't feel like a failure if you can't meet your goals. Instead, try revising your goals to a more realistic level. Also, accept that you may slip in your discipline now and then. That doesn't mean you've failed in your plan.

"Nothing's worse than having a plan with which you can't live" - Paul Hrisko Certified financial planner.

"Nothing's worse than having a plan with which you can't live," Hrisko said.

Indeed, when Schoenke needed to buy a new server for his Web site a few years ago, he was able to afford the $10,000 price tag by dipping into funds he had already saved, and by trimming back on extras like eating out, going to movies and vacation travel.

"Since I've been an entrepreneur, I know what my threshold of pain is," said Schoenke, who is single.

Since his early austere days, Schoenke has sold his Web site, but he remains its president. Still a big saver, he socks away the full amount into the company 401(k) plan.

Start saving small but early

When Dominic Wroblewski, 40, gets hold of a penny, he pinches it so tightly that Abe Lincoln cries. For 22 years, he's religiously used a budget to save for all of his fixed expenses, as well as luxuries such as model railroading, photography and entertainment.

"(My parents) taught me…the money goes in but it never comes out." - Dominic Wroblewski Budget devotee.

His Depression-era parents drilled their banking philosophy into him, he says. "The money goes in but it never comes out," he said.

The key is not the amount you are saving, but the fact that you are saving, Hrisko says.

For example, if a client wanted to save $300 a month for retirement -- quite a big chunk all at once -- Hrisko said he would urge the client to start lower, perhaps $100 a month, and work up to the higher amount.

"That money continually goes into savings and continues to grow," he said. "My clients say they never realized how (it) can grow. Then it (realization) kicks in and they are looking at other ways to reduce expenses."

Tips to Make Your Budget Work And Still Save For Retirement

• Shoot to save 10% of your income for retirement. If you can't afford 10%, try a smaller amount. The key is to get started, Petote says.



• Put money in your savings accounts using an automatic deposit system. With this system, saving for retirement becomes like paying a monthly bill. In essence you're making yourself a creditor.

• Start saving early. If you're young, the one thing you have working for you is time. Say at age 25 you started saving $2,000 a year until age 35 and then stopped. By the end of those 10 years you would have $37,062. By age 65, assuming a 10% return, you should have $646,726. If you started saving $2,000 a year at age 35 and continued to add another $2,000 a year until retirement you would only end up with $363,886.

• Create a slush fund so you don't have to cut yourself off cold turkey from little indulgences like new shoes or collectible toys. Wroblewski, an operations manager for a commodity trading firm, sets aside a modest amount each month to spend on his "weaknesses," photography and model railroading. "You will hate it at the beginning. … (But) as time goes on it will pile up," he said.



• Get rid of your ATM card. It provides ready access to cash, which can result in undisciplined spending. "You want to save money? Then kiss your ATM card goodbye," Fiorillo said. "Holding an ATM card out is like giving chocolate to a chocoholic."



• Look at your income tax withholding. Don't have the IRS withhold more money than necessary just so you can get a refund, Fiorillo said, because that means you're essentially giving the federal government an interest-free loan. "You are doing Uncle Sam a favor and he doesn't even write you a thank you note," she said.



• Take half of any raise or bonus and put it into savings, Fiorillo urges. Have fun with the other half.

The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.