Posts Tagged ‘401k allocation’

Tax Time = Tuneup Time

March 28, 2011

This recent article by NY Times writer Ron Lieber is a great reminder that tax time is a great time to check in with your complete financial picture and make some tweaks to keep you on track. It’s also a great time to organize your filing and get rid of financial clutter!

In short, the article suggests the following steps as long as you’re digging into your financial records. I’ve added my own tips to the steps as well as the author’s advice.

1. 401k checkup: First, rebalance your funds. As mutual fund values change, so does the allocation of your 401k account. It’s important to go in at LEAST annually (I recommend twice a year and help clients do the same) to reset to your target allocation.

While you’re in there, liquidate any company stock that you have accumulated. Many employers give their match in company stock, but it is risky to hang onto this. If things go south with your company, you could be out of a job AND see your 401k value go in the tanker. Diversify away from having all your eggs in that basket.

What about those old 401k accounts from former employers? If they’re still sitting in the company’s plan, this is a good time to consolidate those accounts into a rollover IRA, where your options will be greater and you’ll save on administrative fees. Not sure how to do this? Guess what else I help my clients do…

2. Saving for the Medium Term: We’ve all heard the rhetoric about saving for retirement and the benefit of saving early, and who hasn’t heard of the absolutely-necessary emergency fund? But what about the other things in the medium term, like vacations, large purchases, home maintenance or other big-money items that probably don’t fit into your day-to-day budget but that you’d like to eventually buy? Get started today by setting up a separate savings account for each goal, then make your savings automatic. Fifty bucks out of each paycheck probably won’t be missed, but it can add up quickly toward that week in Nantucket or new tires on your car. ING Direct lets you set up subaccounts and they offer great rates, compared to what you might get down the street at your bank branch.

3. Automatic Donations: If you’re charitably minded but often put off writing those checks till the end of the year, consider dividing your donation by 12 and setting up automatic monthly donations to ease the burden on your end-of-year budget. And no matter when you are giving money to charity, make sure you’re either writing a check or using a debit or credit card to provide an accurate record of the donation for your tax return. The IRS no longer allows the “I put ten bucks in the offering plate at church,” deduction. You gotta prove it.

If you’re an American Express cardholder, Lieber recommends their Members Give program, which lets you set up automatic donations or you can even use Member Rewards to make your gifts. I’m all about credit card rewards as long as they’re not incurred by debt you’re going to carry from month-to-month!

Taking these little steps should only take about an extra hour as long as you have all your financial information out, and it can make a tremendous difference in your financial health going forward, so just do it! You’ll be glad you did when you begin to reap the rewards of sound financial management.

Kelley C. Long, CPA is a Chicago-based financial coach who believes you shouldn’t have to have a million bucks to receive personalized financial advice. Check her out at


Financial Advice for the Ages

October 12, 2010

There are some personal finance rules of thumb that are set in stone across the board, no matter who you are, how much money you have or what your financial goals are. For example, whether you make $1,000 per month or are worth $10 million, you should have an emergency fund that equals a minimum of three months expenses.

But then there are also rules and suggestions that change as you age and (hopefully) earn more money. Depending on your situation, here are a few age-based tips to maximize your financial well-being.

At this age you’re probably still single, no kids, making pretty decent money, traveling a bit, pretty career-focused and not thinking too much about retirement. What essential steps should you be taking?

  1. Get debt-free and stay that way. Pay off your credit cards, student loans and car loan to get your credit score in tip-top shape for when you will inevitably want to qualify for the best mortgage rates.
  2. Take advantage of your employer’s 401k benefit. If you’re offered a match, put at LEAST the amount in there to maximize the match. Aim to defer at least 6% of your salary, 10% if you can afford it.
  3. Get your emergency fund in place ASAP. Start with only $25 per paycheck if you have to, but make it automatic, and once the money is in there it stays. You’ll be glad you have it if you lose your job or have an accident.

If you’re a typical American, by this time you own a home, have 2.3 kids and are settled into a career that provides a solid income. You probably spend a lot of time at your kids’ events and have a couple of nice cars in the garage. Make sure you’re staying financial healthy by also doing the following:

  1. Keep socking that money into your 401k. Do NOT sacrifice retirement savings to pay for your kids’ education. They don’t give retirement scholarships or loans.
  2. But you should be saving for college if you can. Decide how much you do want to help (some people want their kids to pay for some to make sure they value the opportunity) then open a 529 account for each child with monthly automatic contributions. Also, make sure you’re matching any expensive extracurricular activity costs with college savings. If you can’t afford to save for college AND pay for select soccer or elite gymnastics, reconsider the high-end program. Chances are your child won’t be making a career out of it and while it might be a tough pill to swallow to drop down to a more affordable league, it will be a lesson in sacrifices and choices that won’t be forgotten.
  3. Make sure your emergency fund balance has been adjusted to cover increases in your expenses over time. Once you’ve reached the goal, keep up with the automatic monthly savings into a Roth IRA or money market savings account.

You survived toddlers and are now enjoying the final teen years with your kids, who are hopefully college-bound overachievers. You may be considering a second act career or wondering what the heck you’re going to do with your time once the last of your brood flies the nest. What else should you be thinking about?

  1. It’s probably time to really think about what retirement means to you, then putting that story into numbers. Most people these days aren’t really planning to live out their days on a golf course, but would like the flexibility to hit the links when they like while also staying engaged and active. Think about how the cost of your lifestyle will change and make sure you can weather that.
  2. Take a look at how your 401k (you’re still contributing, right?) is allocated. At this point you should only have about 50% of your funds in stocks, so make any updates to put the other 50% in solid bond funds or other fixed income instruments.
  3. Try to get your house paid off sooner rather than later. Your goal should be to retire completely debt-free.

As with all personal finance tips, these are simply general ideas based on what the “average” American deals with through life. Of course your situation is going to be different and you’ll make adjustments as needed according to what’s important to you. Above all, remember that the purpose of all of this is to simply allow you to enjoy life without having money as a barrier to pursuing your calling.

Creative Ways to Save Money

November 16, 2009

It seems everywhere we turn these days we find a story about how to save money. I bite every time, only to find that most of the ideas shared (take your lunch to work, trade your car in for a less expensive model, shop the clearance rack) are things I’m already doing. I work from home, making it a no-brainer to eat lunch at home, my car has been paid off for two years, and I am the queen of the clearance rack at Target. But what about the next level of saving money, the level where the little things add up to big savings?

I used to receive a daily email that offered frugal tips, but when the day’s tip instructed subscribers to scrape the remaining deodorant out of an almost-empty canister, set it aside, and add to it with each used stick of deodorant, I knew these tips were a little TOO frugal for me. To give balance, I’d like to offer my own creative ways to save a few pennies. As the familiar adage goes, “A penny saved is a penny earned,” and my mother still reminds me to, “Waste not, want not.” Try a couple of these ideas and see if you can’t save up a little vacation fund from your savings.

Beef Up Beauty Treatments: Extend the time between expensive beauty treatments with some expert tips on maintaining your hair color and manicure. If your roots give you grief after even three weeks, ask your colorist if she will do an interim coloring just along your part, allowing you to go closer to eight weeks between full color treatments.

To prolong the life of a natural nail manicure, put a top coat over your color at least every three days — this simple step could give you up to an extra week! Postpone the next fill on your acrylics by massaging oil into your cuticles and nails every night. This will keep your natural nails from separating from the acrylic and keep them on your nails longer.

Skip the Soda: Try ordering water with lemon when dining out rather than ordering a Diet Coke or iced tea. Most restaurants now charge upwards of $2 for a soda, which can end up being 25 percent of your total lunch bill! Save the beverage indulgence for cans at home or the office, and you also will experience some added health benefits from drinking more water.

Java Justification: If you simply can’t bring yourself to give up your daily $4 latte, try bringing your own mug. Many coffee shops give a discount for bringing your own, and it saves all those extra cups from their landfill destiny. A 10 cent discount each day for a month will save you almost enough for a free latte, and Mother Earth will thank you.

Go Green with Gifting: Rather than buying expensive wrapping paper or gift bags that ultimately end up in the garbage anyway, take a look around your home for creative wrapping ideas. The Sunday comics make whimsical wrapping paper, or if you have kids, enlist their help in making your own. Simply open up brown paper shopping bags with a couple quick cuts, and have your kids decorate with paint for personal and fun gift wrap.

By exercising a little creativity, it is easy to trim another $50 or so from your monthly spending. Tuck that money away in a savings account and soon you’ll have a sizable nest egg!

A version of this post was published in the Cincy Chic column “Cents & Sensibility” on November 9, 2009.

401k Fitness Class

August 23, 2009

How did you decide which funds to use when establishing your employer-sponsored retirement plan (aka 401k, 403b, profit-sharing, etc)? Have you made any adjustments after the last market meltdown? How do you know when to make a change or how to determine the percentages for each fund? When was the last time you rebalanced your account? Don’t worry if you haven’t a solid answer to any of these questions. Most people don’t! However, your retirement account will most likely be your biggest asset down the road, and just like other long-term plans and goals, it does need a little nurturing along the way to produce the best end result. Check out my 401k Fitness class for individual coaching in a group setting at an economic price. Please contact me for dates of upcoming classes.

What is 401k fitness?

It is a small class designed to re-visit basic terms associated with investing, followed by 1-on-1 coaching to shape up your retirement portfolio to take advantage of current market conditions. You’ll learn tips for keeping it on track going forward as well as leave with a better understanding of the nuts and bolts of mutual fund investing.