Lauren Heller improves her savings efforts


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Last year Lauren Heller spoke with Bankrate’s Greg McBride, CFA, about her financial concerns. With no credit card debt, Lauren was already only using her debit card for purchases — so she was way ahead of the game in that regard. She was contributing 6 percent of her gross income to her employer sponsored retirement plan, paying an extra $100 every month on her mortgage balance and saving $150 every month. But she was still concerned about being adequately prepared for retirement and saving enough for her sons’ college educations.


The challenge:
She says short on college and retirement savings. We say need to budget and build an emergency account.
The plan: Create a budget to make room for more savings.Follow-up: Still no budget, but more savings and confidence.

What did she do?

“I did not do a budget,” she says. “Probably typical, huh?”

Heller found the idea of tracking expenses and compiling a monthly budget “daunting,” but she felt that by using only a debit card for purchases, she controlled her spending and knew what money she had coming in and going out.

She did stop putting the extra $100 toward her mortgage every month, however. Because she felt that she needed some extra money, she put only $50 toward savings.

“I didn’t open a Roth IRA,” she says. Instead Heller set up a regular savings account as a cushion for monthly expenses.

She doesn’t have that much saved up, she admits. “Maybe enough to cover expenses for a month, if that.”

“But,” she adds, “I do have a home equity line of credit, so if I needed money for an emergency, I could use that.”

Her home equity line has already funded about $15,000 worth of home improvements and she has more planned.

Even without a big emergency fund stashed away, Heller feels confident about her retirement savings plans.

“On Greg’s recommendation, I went ahead and opened a new target retirement fund at Vanguard and started putting all of my company 403(b) contributions in there. I had a traditional IRA and this was in addition to that.”

The college funding situation remains unaddressed, though. “That is something that I haven’t really discussed at this point with their father,” Heller says. “So, no, I didn’t open 529 plans.”

Greg’s suggestions
  • Set up a budget and track expenses every month.
  • Discontinue the extra $100 payment to the mortgage principal every month and funnel it into savings, in addition to the $150.
  • Open a Roth IRA.
  • Consider investing less conservatively in her existing traditional IRA.
  • Look into 529 plans for the kids.

On the whole, Heller feels like she benefited from speaking with McBride.

“Retirement was an important issue for me,” she says. “I wanted to make sure that I was going to be saving enough and putting enough away. So putting more into the target retirement fund was really a relief, just to work that out. It was just the positive affirmation I got that I was on the right track — doing the most retirement contribution that I could and not using credit cards — basically taking the advice of saving whenever and wherever I can.”