Depending on where you live, it can be hard to “get ahead”. Living within your means is the key to being able to save for your financial goals. Cash flow is king. First, we need to calculate your after tax income. Second, we analyze what you are actually spending. This determines how much you have available to save. Our job is to help you improve your cash flow so that your money goes where it matters most.
We call the period of your life when you have children under the age of 5 the “Cash Hemorrhaging Years”. They are expensive years due to childcare and other first time expenses. However, they do come to an end. Financial planning helps you plan for growing your family and seeing the light at the end of the tunnel.
Cash flow is king. You need to know what is coming in after taxes and going out the door. This is how you can figure out how much you can afford to save. Knowing your cash flow can be a big motivator in asking for a raise, looking for a better paying job and making changes to spending so that you can save more. Saving for the long-term also needs to be a specific goal. You need a target and to know your time horizon for that goal. By being specific, you are more likely to achieve your goal.
There tends to be a big difference between what a lender with lend you and how much house you can actual afford. By looking at your historic spending and projected spending, we can assess how much house you could afford based on your lifestyle. No one wants to feel house poor. Knowing your price range helps tremendously during the house hunt so that you do not fall in love with something you cannot afford or sacrifice a must have because you think you cannot afford it. Buying a house is likely your largest purchase in life. Knowing how much house you can afford will help you make the right financial decision for you and avoid FOMO.
In general, a remodel is less expensive that a move. You need to determine whether your current property can be upgraded to suit your needs. Do you love your location? School district? Can you afford the remodel and how would you pay for it? If the answer to these questions is no, or I do not know, a move may be a better fit. Moving tends to mean paying a premium for a bigger or better home and higher property taxes. It may be worth it. We can help you with this big decision by analyzing and comparing your options.
The IRS created 529 plans to encourage savings for college by offering tax-free growth as long as the funds are used for qualified education expenses. These plans have also been expanded so that you can use some funds each year to pay for private primary and secondary school. Depending on your financial situation, you may want to consider other ways to save for education. For example, if you are behind on retirement savings, it is better to focus your savings on qualified retirement savings first. This money can also be used to pay for qualified college expenses without penalty.
Retirement is most people’s largest financial goal. It is critical to know how much you need to be saving each year and where to put those dollars. While it is never too late to start, the early you start this savings the better.
How and where to invest your money is determined by the underlying financial goal. You need to know the time horizon for the goal. For example, saving for a home purchase in the next three years requires different investing than saving for retirement in 20+ years. The rule of thumb is to keep money you need in less than three years in cash and cash equivalents. This short time frame means that you may not be able to weather market ups and downs. However, for retirement, time is on your side.
Debt tends to result from living beyond your means. Getting out of debt requires both a plan for dealing with current money owed and improving cash flow.
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