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Using The Money Management Tool: Setting a Budget

Recently we introduced The Money Management Tool to help clients better organize their financial lives. The tool has lots of features and we will occasional explain how some of the features are being used by our clients (or should be used) to help them reach their financial goals.

This post will deal with prospective client who needed some help staying on budget.

Situation: A young couple with two children asked us for guidance on getting a handle on their debts. They had multiple credit card balances with obscene interest rates, a result of unexpected bills. They were spending more and more of their income to make debt payments instead of saving for retirement. They were slowly realizing that they would not be digging themselves out of debt anytime soon and needed a plan to get back on track to save for retirement.

Problem: During the initial meeting, we discovered a significant amount of their take-home pay was going toward non-essential expenses, such as the most premium cable package available and eating out for lunch every single day.

Solution: Directing savings originally intended for retirement to pay down credit card debt is an acceptable strategy in some cases. But when there is a lot of non-essential spending occurring, a tightening of the belt should be the first strategy. In this case, the client could connect their credit card account to The Money Management Tool and analyze their spending habits to see just how much is spent on restaurants and entertainment. They could then develop a budget to help them stay on track.


If you or someone you know needs help getting their financial house in order, this tool can help.

Contact us today to get started.

NU Fixed Account Rate Declines

NU Retirees: For over a year, the interest rate for the Fixed Account in the 401(k) plan at Fidelity has been declining.  The decline has continued into 2015 with the rate reducing from 2.25% to 2.0%.  As we have mentioned in the past, we now view the fixed account as a proxy for cash.

We’ve written a lot over the past year about how to view cash in your portfolio – posts can be viewed here.

Your Pot Of Cash Has A Hole In It.

You, like many Americans, may have a sizeable pot of cash just sitting in a bank account earning next to nothing.

The goal in keeping cash in a bank account is safety.

But what if I were to tell you that you that there was a hole in your pot and you are losing 2-3% each year and not even realizing it? You might think twice about keeping high levels of cash in the account.

In a sense, that’s what is happening. Every year, the cost of goods and services increases by 2-3% but the cash stays the same. This cash in your pot has ability to buy a little bit less than it did the year before and the year before that. This is the conception of inflation.

$50,000 today will buy more than $50,000 5-10 years from now.

One option to get around this harsh reality is to invest excess cash in a balanced diversified portfolio.

Why Waiting For The Right Time To Invest May Cost You In The End

At least once a week, a client will give me a reason why they don’t want to invest in the US stock market. They mention the headlines (which are designed to scare investors), and talk about the crisis-du-jour, or reference the looming economic dark clouds growing in the distance.

And so they sit in cash, with its perceived safety, waiting for the dust to settle, the clouds to clear, and the right time to invest.

But will it ever come… will it ever be so clear to the investor as to when they should invest?
Perhaps not.