How to Save $750 in Open Enrollment
Open enrollment is the time to maximize your coverage and 401k choices while minimizing your spend. Learn how to make the most of this opportunity.
It’s time. You’ve received your company’s annual mailers and email reminders, announcing that open enrollment is coming up. BE READY!! Let the fun begin! And how about those 25 page, thick paper, glossy photo brochures for your options? Everyone always looks so happy.
Calling all CDC, Cisco, Coke, Delta, Eaton, Georgia Pacific, Home Depot, Mailchimp, Siemens, State Farm and other GA professionals and families!! LISTEN UP.
The Goal
The goal of open enrollment is to update and optimize your elections, given any potential changes in your situation. What kind of changes?
Someone in the family is going to need braces or extra dental care?
You are planning to have a baby
Your significant other changed jobs
You got a raise and need to increase how much you put into your 401k
You are afraid that Trumps’s tariffs are going to bomb the market, and you need to reallocate your 401k
You never really thought about needing disability insurance, until now
Your kids are starting day care or aftercare and you heard you could invest pretax cash in a dependent care FSA
There are any number of things that could need to be updated. But most people mistakenly think this is just a boring chore, with little added value. And anyway, you made the elections last year, why spend the mental space on it again?
Or worse than complete ambivalence about the topic, you know you need to make some changes, but you are “too busy” to read the literature, preventing you from making a wise decision.
It is easy to end up spending an extra $750/year, with poor choices.
Focus on your vocation and vacation!
Schedule time with me to run through the options. THIS IS A GREAT OPPORTUNITY TO GET AN EASY WIN. I can point out how to maximize your coverage and 401k choices while minimizing your spend … all while focusing on your long term goals. We can get started looking over your options, over a cup of coffee, and it won’t cost you anything.
I’m looking forward to catching up with you.
**After publishing this blog, an interesting article was published from Kaiser Family Foundation data, showing that employee based healthcare costs around $20,000/year ($14k = employer, $5500 = employee)
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Budgeting Part 2 of 3: How To Start Budgeting
The sooner you can get started, and make progress, the more likely you are to stick to it and succeed. So, let’s do this!
BUDGETING 101: for people who hate budgeting PART 2/3:
How to get started
Congratulations! You’ve realized you need a budget. That is the first step towards being in control of your finances, and half of the battle! The next step is getting started with a budget. The sooner you can get started, and make progress, the more likely you are to stick to it and succeed. So, let’s do this!
The majority of the advice out there approaches budgeting with expenses and tools. I have a different approach: First, take a breath. Innnnnn and ouuuut. Then, we begin with your income.
The easiest way to stay in control of your budget is to never have money show up in your “spending” account. Having a big chunk of money in your account is too tempting. Right after you get paid, it’s natural to think, “I work I hard, I deserve _________.”
fund your goals
with automatic payroll deductions
401k - start with 5% of income or max out a company match. For every $100k, that is $208/paycheck. You wont miss it, but over a career, your future self will be pleased.
Health Savings Account - look at last year’s out of pocket spending, set it there.
Dependent care savings plan - what is your kids’ day/after care expenses? You are already spending it!!
set it and forget it
Don’t be average:
The average American has 3.1 credit cards with an overall outstanding balance of $6,354.
Credit Card Usage and Statistics 2019
set yourself up for success with online bill pay
Ok, so you funded some of your goals, but now your paycheck is in your account, and you are feeling flush! Set yourself up for budgeting success by going to your online bill pay and setting up automatic payments immediately after every paycheck .
Schedule automatic monthly payments for:
If you are self employed
Set up a SEP IRA and have money automatically contributed to your SEP IRA account.
Your non-discretionary bills immediately and make it a set amount each month.
We pay GA Power $200 every month. During the winter we build up a nice cash reserve, during the summer we spend it down. The opposite happens with the gas bill. I also like to round up to the nearest hundred on my mortgage, with the extra going to principal.Pay off your damned credit cards! Start with the one with the smallest payoff and allocate all but the minimum amounts for the others.
Transfer money into a savings account for a rainy day fund.
Fund your short term goals: Transfer money into a vacation savings — or other short-term goal like a new car or house renovation project.
IRA or a brokerage account and the kids 529’s - if you are doing nothing, make it $100. Increment in. As you get comfortable, increase it.
“The goal here is to fund your goals, and never even think about the money “leaving” your account, because it never really “enters” your account.”
Don’t EVER give your bank account info to a company to take out auto payments.
You need to control the movement of your money.
Discretionary Spending
Take a moment to recognize the work you’ve done: You set up automatic payments for your non-discretionary bills AND your goals are being taken care of. That is a huge step. Nice work! What will remain in your account, is THE ONLY CASH you have left to spend on discretionary items. That means, you make a promise to yourself: NO CREDIT CARDS when you run out of money at the end of the month.
Advice on credit cards
Credit cards are bad. This is worth repeating: NO CREDIT CARDS. That means, you make a promise to yourself:
DEAR SELF:
NO, I MEAN NONE , NOTHING, NADA GOES ONTO A CREDIT CARD, not even to earn miles for the trip I’m not going to take in the indeterminent future. And if I do take the trip, it will likely be during a blackout dates and I won’t be able to use those elusive “rewards” anyway.
Yours Truly, (really I’m yours… am I getting too meta?)
Me.
Budgeting FAQs
q. I get paid twice a month, I can’t afford to pay all of my bills at once! How will i be able to afford to eat or live reasonably until my second pay check?
or
q. My bills are spread throughout the entire month how do I manage not getting late fees?
A. Both of these questions have the same answer: Spread your non-discretionary bills across your two paychecks. What that may mean is, the majority of your bill paying in your first pay check, goes to the mortgage (and maybe a few utility bills). Leave yourself enough left over, so that you can buy gas and groceries until the next paycheck. On your next paycheck, finish off the utilities and your savings for goals. Leave just enough for your discretionary spending, to make it to your next paycheck.
q. what if one of my big utility bills (e.g. my car loan), needs to wait until the second paycheck, but is due on the 8th of the month, and will thus be late?
A. Most of the time, if you are up to date on your bills, a company can work with you to change the due date, give them a call. If they won’t, make a minimum payment on your first paycheck, and then finish the payment on the second paycheck.
q. Why autopay the same amount each month?
You want to set up your payments on autopay, and don’t want to wait on the bill.
You don’t want to worry about any accidental underpayments.
Over the course of the year, the payments will average out.
Q. Josh, by the end of the month, I either don’t have any money left over, or worse, I am spending on my credit card to make ends meet!! This method sucks, what gives?!
A. Good question… the answer to this is in Budgeting Part 3
Not sure if a budget is for you? Take my free assessment:
End of Year Financial Planning Checklist
6 time sensitive financial moves you should consider now, in order to successfully close out 2018.
With the holidays upon us, it can be difficult to make time to get your finances in order. Many people push out closing their year until well into the next year (ever scramble in April to get all your tax work completed?). But there are several time sensitive financial moves you should consider now, in order to successfully close out 2018.
Review your open enrollment options and optimize your selections
Make sure that you and your spouse are coordinated on health care and dependent spending and 401k and Roth saving goals.
Adjust your tax withholdings
If you have had a child in 2017, been through a divorce, changed jobs or had a change in income, you will likely need to adjust your withholdings.
Fund long term savings vehicles (401k, Roth IRA, IRA, SEP IRA, 529s).
Contribution limits for your 401k is $18,000 and IRA is $5,500. Beware that there are limits on IRAs depending on your income. If you are self employed, take the time to fund a SEP IRA, which has much higher limits than a standard IRA or 401k.
Check your health and dependent care flexible spending plans
Track down your receipts and enter them now. I like to use this wind fall to fund Christmas. If you have not used all of your money, its time to do it now. Also, if you have hit your health care deductible, it may make sense to hit the doctor one more time to take care of anything you have been putting off.
Set an end of year budget.
There is a lot going on: gifts, travel, family events, parties, family pictures. Start to think, at the very least, about some guard rails that you want to set.
Start Planning for Next Year
Set up a meeting with your financial planner. Now is the time to start setting some longer term goals for next year and help secure your retirement for tomorrow. Let me guide you through the process and monitor your progress.
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The Problem with the Majority of Parenting and Investment Advice.
I read an article on the Farnam Street blog, 5 Mental Models to Remove (Some of) the Confusion from Parenting and was struck by the similarity between the common pitfalls with parenting and personal finance advice and the approaches we often take:
I read an article on the Farnam Street blog, 5 Mental Models to Remove (Some of) the Confusion from Parenting and was struck by the similarity between the common pitfalls with parenting and personal finance advice and the approaches we often take:
"Few topics provoke more unsolicited advice than parenting. The problem is, no matter how good the advice, it might not work for your child. Parenting is the ultimate “the map is not the territory“ situation. There are so many maps out there, and often when we try to use them to navigate the territory that is each individual child, we end up lost and confused. As in other situations, when the map doesn’t match the territory, better to get rid of the map and pay attention to what you are experiencing on the ground...
...As in any other area of your life, developing some principles or models that help you see how the world works will give you options for relevant and useful solutions. Mental models are amazing tools that can be applied across our lives."
Are you caught up in tactics without a clear mental model or strategy?
Many of us save a few bucks every month, stash money yearly in our kids 529s, and invest in our company's 401k plans. All super good things to do, but will it get you to where you want to be? Do you have a set of family goals that inform all areas of your strategy? Here are a few of mine:
I want my kids to be self-reliant adults who will make a difference to society. That means I am comfortable if they fail often, as long as they win in the long run. They play a variety of sports, play violin or the sax and arent bashful about speaking Spanish to a stranger. If you have heard a 10 year old practicing violin, you know the sound of failure. And we save each year so they can go to sleep away camp for part of the summer, where they learn how to make friends and learn on the fly.
I want the freedom in my own life to make choices not based entirely on finances. That means I invest part of every paycheck, whether the market is up or down, so that I can create long term wealth. And we prioritize traveling for new and unexpected experiences. That means Jenn and I have a weekly family budget and stick to it, even if we have to forgo some fun now.
Are you living by tactics as you go? Have you developed a set of guiding principles? If you haven't, you are not alone. Want to live free of financial burdens and have peace of mind? You'll need a strategy and a plan. I can help.
Let's talk about your personal financial goals. Contact me to set up your free consultation.