| Have
you reached a savings plateau? | | |
| "We spend a lot of money
to please their parents," she says.
Her boys' favorite gift of the
year was a pack of six multicolored balls.
College and
retirement compete
It sounds small, but a "retirement readiness
survey" conducted by Fidelity Investments showed
how much is at stake.
One in three workers said that they have pushed back
their expected retirement timetable due to financial shortfalls.
Dual-income households with annual
incomes of more than $50,000 were most likely to say that the need to save for
college competes with their ability to save for retirement -- and that it was
the main reason for their longer-than-expected time on the job.
It's better to chip away at the two largest savings
challenges of life than to ignore them.
The financial firm suggests converting a monthly payment
that ceases for one purpose into a savings mechanism for another.
For example, a family already accustomed to making regular payments
for day care can divert these payments into a 529 college savings
plan once their child begins attending elementary school. When the
child graduates from college, the monies earmarked for college expenses
can be shifted to retirement savings.
Ask
for 529 plan contributions from family members for holiday and birthday gifts
when your children are small so that earnings can compound over the years. Even
small amounts would help.
Finally, don't skip the free money. Fidelity offers
a credit card that puts 2 percent of certain purchases into a 529
plan. Other reward-based programs abound that can fatten up a college
account even, if even only pennies at a time.
Something's
got to give
Preserving fruit and clipping coupons is, in the end, of
limited utility. "Something has to give. You can only
stretch money so far," Glink says.
At some point, tough choices have to be made, and
some of that will involve a revised understanding of financial priorities.
Glink believes that fully funding
retirement comes ahead of everything. Put it at the top of the list if money for
savings is not going to get to everything. "Somebody will
lend you money to send your kids to school, but nobody is going to lend you a
dime for retirement," she says.
Dennis Filangeri, certified financial planner, says
that just like Maslow's pyramid leading to self-actualization in
psychology: There is a financial hierarchy of needs, and following
it will help distribute limited resources.
To start, though, he advises clients to take a look
at their cash flow -- the real one, not that imaginary budget --
and decide if they are trying to fit a big lifestyle into small
finances.
"Living
within your means is taking care of everything and still having change left over
from your paycheck," he says.
Trouble is, when he says "everything," the
financial planner is counting the rainy-day savings and college
and retirement fund contributions along with the mortgage.
The roof over your head is the most common source
of an oversized lifestyle, according to Filangeri. Moving into the
right neighborhood, choosing to own instead of rent, needing a spare
room -- these are all emotional decisions that people who believe
they are trying hard to save money can rationalize away. To make
a real change, every part of life has to be up for negotiation.
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