By Lizzy Scully
How do you spend your money? This may be the key question to figuring out how to manage your finances during these tough times. According to Kevin Ruebesam, a Berthoud resident and a senior financial consultant with Thrivent Financial For Lutherans (Thrivent also works with non-Lutherans), the easiest thing you can do to curb your spending is to create a budget tracking what you spend each month.
“Reviewing or analyzing a credit card statement or check register to identify where you are spending money is a starting point to help you identify where your money is going,” Ruebesam said. Then, prioritize your most important bills, cut out the things you really don’t need to buy, and use cash to make purchases.
“It’s really easy to go to Starbucks every day and buy a venti caramel macchiato,” Ruebesam added. “If I put that on a credit card it’s out of sight out of mind until the end of the month. If I pay for those things with cash and if I live on a budgeted cash allowance, it helps protect that cash. If I know I’ve only got $25 bucks I can spend this week, I’m a lot more likely to drive by Starbucks than pull in and spend that five dollar bill.” You give your kids an allowance to teach them how to budget, he stated; why not give yourself one as well?
To reduce spending, Ruebesam suggested a mixture of other tactics, from reallocating your investments to analyzing what you are spending your money on.
To reduce spending, reconsider making that daily trip to your local coffee shop. “That $4 per day is $20 per week, which is $80 per month, which is about $1,000 per year,” he explained. “Just cutting or reducing that habit can save you a lot of money.” Also look at how you use your cell phone. Find a family plan and/or utilize text messages to save some money. In regards to your cable channels, do you really need 150 channels when you only watch a dozen? “Designing a cable program to where you’re only paying for the channels you’re really watching can save you some money,” he added.
Other things you can do include: wear more clothing at home when it gets cold, rather than cranking the heat up; riding your bicycle or walking to work can cut down the monthly gasoline bill; and/or cut the days and nights that you eat out by one or two (Ruebesam now limits his lunch outings to business lunches because then the outing becomes tax deductible, and he and his wife make bagged lunches every day.)
People who are close to retirement may want to reevaluate their retirement plans, Rubesam said. “Several of my clients are foregoing expensive vacations – i.e. trips to Europe – until there is some market recovery in their portfolios or until their budget supports that trip,” he stated. Now is not the right time to travel because food and board in Europe are twice as expensive as they were a few years ago.
Finally, he suggests people reevaluate their investments and reposition dollars into investments where they will pay taxes later or never. Putting money into municipal bonds, insurance products or ROTH IRAs will help save money. “If I have money sitting in a CD that’s earning four percent interest, the interest is taxable to me every year whether I spend it or whether I reinvest it,” he explained. “If you reposition that CD into a fixed annuity product – as conservative or aggressive as you like – you can earn the same or a little more, but the interest is not taxed on an annual basis.” If you need to take that money out, you would pay only on what you take out. A fixed annuity is a savings vehicle that allows you to put money away and grow it on a tax-deferred basis. Other products, such as life insurance contracts, can grow tax deferred; if money is never taken out, taxes never have to be paid, and that money can be passed on to heirs tax free as well.
Living with less can be easy to do with some simple planning. For more information, visit: https://www.thrivent.com/fr/kevin.ruebesam.