Tighten the Belt and Still Breathe

We all know we should be saving—for college, for retirement, for that much-needed new car or bigger home. But how do we set money aside and still make ends meet? 

By Dwain Hebda

How to tighten the belt and still breathe

Most families know they should be saving for college or retirement, but many find it very challenging. According to financial professionals, where there’s a will to save, there’s generally a way, and once a family gets into the habit, it gets easier as they go.

“[Saving] sucks, when you start doing it at first. Who wants to give up $100 or $500 a month?” said Rocklin Senavinin, president of Fiduciary Wealth Management in Little Rock. “But once you do it, once you kind of jump off the cliff, it’s not as bad as a lot of families think.

“You’ve got to save as much as you can as quick as you can. Once you start doing that, you build a portfolio and then you really get engaged because now you’ve got this money and it’s a lot more important than your $100 in a savings account.”

The national statistics on Americans’ saving habits are troubling. As Matthew Frankel reported last year on MotleyFool.com, 92 percent of people in the U.S. had less than $1,000 in savings and a third of them had zero set aside. This, he said, comes at a time when credit card debt is the highest in nearly a decade.

Mary McCraw, associate financial planner with The Arkansas Financial Group in Little Rock, and a mother of two, said it’s not just frivolous spending that hamstrings many families’ saving plans. Other aspects of a household’s financial picture also have to be taken into account.

“There are a lot of other financial things going on with younger people and young families who also need their resources,” she said. “You don’t want to ignore paying off debt, and getting into a house and those types of things.

“As a goal and for somebody who’s just getting started, get to that point of saving at least 10 percent [of your income]. If you can start that early and young, you’ll get a really good start.”

Frankel goes on to note some good news in his article, that being more young people are heeding the age-old advice to save—67 percent of 22-year-olds and 76 percent of 30-somethings, according to a Transamerica study. That’s music to McCraw’s ears.

“The earlier you start, obviously, the better, the more bang you get for your buck,” she said, noting some college savings plans allow socking away as little as $10 a month.

“When kids are small, you have no idea where they’re going to go to college or what they’re going to do,” she said. “But to get something started is great, especially if you’re talking about young children.”

Senavinin agreed, saying it’s often just a matter of finding a way to get off the bench and into the savings game. Fortunately, this can be accomplished relatively easily with a little planning and the discipline to stay committed.

“It’s a mindset,” he said. “A lot of times when families make those initial deductions out of their accounts, it hurts the first couple of months but they always adapt.

“People tend to procrastinate, or they make up excuses or think this or that, but the truth of the matter is, you’re never going to fail if you save too much. I’ve rarely seen a situation where clients have oversaved. It just doesn’t happen.”


Tips for Successful Saving

It doesn’t take much to get into the habit of saving; here are a few pointers to get you started on a brighter financial future:

Employer-sponsored retirement plans are among the easiest and most consistent ways to save, because employees have money deducted from each paycheck before they can spend it. The best of these plans feature your employer matching some portion of your contribution. “If your employer offers some type of retirement plan match, that’s free money,” Senavinin said. “If a family is absolutely new to saving and they’re not contributing to their work retirement plan, we start there.”

Christen the new bundle of joy with his or her own education savings plan. It’s a great way to put aside money for college while giving other relatives the opportunity to pitch into the cause. “The Arkansas 529 plan is a really great savings vehicle, especially if you’re starting with a very young child,” McCraw said. “It’s very easy to set up, and they have age-based investments so you don’t need professional management. Plus, they have tools to email other family members to contribute or print out little coupons for grandparents who earn a state tax deduction for contributions up to $10,000 a year.”

There’s no absolute timeline that works for every family, and your situation is going to have elements that are uniquely your own. A good financial plan accommodates these differences and changes over time. “Families working with a financial planner should evaluate their situation every two or three years,” Senavinin said. “It’s very easy for a financial planner to look at the balance, run a projection and say this is how far behind we are of the goal, or we’re on track or a little bit ahead.”  

People wouldn’t dream of following an online tutorial for removing their appendix at home, and the same thinking should apply to financial health. While there is much you can do on your own, including a number of free budgeting apps, you often get what you pay for. A financial professional can take a lot of the guesswork and worry out of saving, provided you’ve done your due diligence to find one you’re comfortable with. “Look for someone who can be objective,” McCraw said. “Our firm, in particular, like many others, is fiduciary, meaning we do not get paid by anyone other than our clients. We’re very focused on giving advice in their best interest because we’re not getting any compensation outside of that.