Money Talks Blog by Oxford Planning Group

Last week's blog touched on how to save. Let's discuss ideas on where you should keep those savings. Having a specified savings account can be beneficial to help you meet savings goals. It can be hard to look at one account and see that you have a good amount stored in it, only to realize a good portion is supposed to be for savings, not that spur of the moment weekend trip with your friends. By placing your money for savings into its own account, you can make sure you are only spending what you should. A general savings account is okay but there are better alternatives.

The most important things to think about for your savings account are when you will need access to the money (monthly or yearly?) and the annual percentage yield you are hoping for. Ideally, savings should only be dipped into for certain predetermined expenses like that new car you've needed. However, things come up unexpectedly and cannot always be helped.

If you know you will need to take money out of your savings within the next six months, consider:

High Yield Savings Accounts: Lower interest but more accessible

• Typically have a low annual percentage yield (APY); however, money can be withdrawn more easily than with other accounts
• Savings accounts have a 6 time per month limit for withdrawals

Money market Accounts: Higher interest than savings accounts but slightly less accessible

• Six time per month limit usually still applies

If you know you will not need to take money out in the next six months, year, or longer consider:

Certificate of Deposit (CD): Highest interest but penalties for early withdrawal

• Savings certificate with a fixed maturity date and specified fixed interest rate
• Must agree not to withdraw the money for a certain amount of time (times vary from six months to five years)

If you have no current savings, start small with what you can afford and start to build it up. While the APY for most small accounts won’t result in much money gained, it can add up to larger sums if you really try to stick to a savings plan per month and build up a good store. And hey, even if you only make $30 in interest over a year, that’s money you got for simply doing nothing and leaving your savings alone.

Check out our savings calculator to see how long it will take you to reach certain savings goals. You can play around with monthly savings, rate of return, and years to save.

https://www.oxfordplanning.com/resources/calculators?view=calculator&id=28

If you have a goal of savings $10,000 and already have $1,500 in savings, how long will it take to reach that goal? By putting $400 a month into savings, you can reach your goal in 1 year and 9 months. If you can put $550 into savings each month that cuts down the time by 6 months.

Important Notes: 

• Make sure that your savings plan is realistic. Make sure you are budgeting enough for groceries, rent, utilities and any other monthly necessities. If you can't meet your goal with your current budget, consider taking on a small part time job to make some extra money.
• If you decide that one of these savings accounts is for you, do your research. Different banks offer different percentage yields. Some also require a minimum amount of money to open the account or charge a fee. Shop around and look at comparisons to determine the best option for you.

Whichever type of account you choose, don’t wait-start today!

Stay tuned next Friday for our post about understanding you 401(k) options.

Author: Kirsten Eddy, Junior Portfolio Analyst

Have you ever looked at your bank account at the end of the month or even the end of the week and wondered how you spent so much money? It's easy to get yourself into habits like spending too much at bars on the weekend or eating out multiple times a week. If you’re looking to save money, the first step is to create a budget for yourself.

In a society where we are encouraged to be constant consumers, it can be hard to figure out how to budget and save effectively. Let's break it down into a few simple steps:

1. Calculate your monthly income
   •  Figure out your takeaway after taxes either by using your latest paycheck (if you work a set number of hours with a set rate per week) or by using a free online calculator
2. Determine all your monthly expenses
   •  This includes rent, car insurance, health insurance, student loans, gym membership, Netflix subscription, groceries, gas, ect. An easy way to do this is by looking at credit or debit card statements from the previous month and writing down what you spend your cash on. Lastly, make a needs versus wants lists. These are different for every person, your needs might be on someone else’s wants section but that’s okay.
3. Decide what to put into savings
   • Once you have subtracted your monthly expenses from your income, it's time to decide what to do with your leftover money. Start by writing out specific saving goals and put those as a priority before spending any of the “fun money” you have left after your expenses. This could mean putting a certain amount into general savings every month or getting more specific and putting some into general savings and some into specific savings for things like travel or a new car. Also consider having a separate fund for unplanned expenses like new tires or doctor's fees.
4. Divide up the rest!
   • Create some categories for yourself such as date nights, weekend fund or whatever you want to spend it on. 
5. Optional: Multiple Budgets
   • Now that you have a basic budget you want to stick to, consider creating a low, medium, and high spending budget. This is simply done by adjusting the amounts going into your savings for a specific month to allow for some extra spending. Then choose a budget to stick to at the beginning of each month. If you have a goal that you want to meet as fast as you can you’ll want to stick to the low spending high savings plan. If you are okay having it take a little longer to meet your goal and you have a couple of extra events you want to go to one month then choose to stick to your medium or high spending budget.

Where else can you save?

Now that you’ve created your budget, are you happy with how much you’re putting into savings and how much you have left to spend? If not then take a look at areas in your life where you may be able to save money. Here are just a few examples:

• Eat at home: This category is my biggest challenge. Food can really add up whether its eating out or spending too much on groceries. Take a look at how eating out for lunch daily is eating away at your cash. You might be surprised!

Let’s say it costs you $5 to make a bagged lunch to bring to work versus $12 to eat out that day. By switching to the bagged lunch for a month (twenty lunches), you’ve already saved $140.

• Memberships & Subscriptions: Are there any subscriptions or memberships that you don’t really need? Gym memberships that you rarely have time to use, streaming services for music and movies. If you’re using them, great, but they’re easy to forget about if you’re being charged automatically every month.
• Finding free activities: As fun as it is to go out on the weekends with friends, it can also be quite expensive. Maybe one night a weekend or every other weekend try out something less expensive but still fun like a BYOB board game night or free live music in your area. Invite friends over to have a pot luck dinner and share some drinks at home.
• Roommates? If you are currently living alone or thinking about moving into an apartment soon, considering roommates could save a substantial amount of money every month.
• Less “Treat Yourself”: Everyone likes to get something special after a hard day or week, but are you doing this too often? Daily trips to Starbucks or frequent shopping for things on your wants list can cost a lot. If you have something in your life that you use to treat yourself, think about if there is some way you could make it cheaper. Maybe buy the ingredients to your favorite Starbucks drink to make at home or have a girls night to do your nails. If you really don’t want to cut back because it is important to you, then that is completely fine. Just add it to your budget!

Instead of thinking of a budget as a chore, think of it as a great tool to help you reach your goals.

Tools & Apps

• Nerdwallet.com has a useful Monthly Budget Worksheet to help you get started:

                 https://www.nerdwallet.com/blog/finance/budget-worksheet/

• Hourly Paycheck Calculator After Deductions:

                  https://www.adp.com/resources/tools/calculators/hourly-paycheck-calculator.aspx

• Oxford Planning Group Lunch Cost Calculator:

                  https://www.oxfordplanning.com/resources/calculators?view=calculator&id=16

Some of the best budgeting apps:

• Mint
• Pocket Guard
• YNAB

The newest member of our office, Kirsten Eddy our Junior Portfolio Analyst, will be taking over this portion of the Blog. Stay tuned every Friday for new posts!