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Ask the Experts: October 2020

Most people have money questions. After all, no one knows everything. Unfortunately, a lot of people are hesitant to talk about money at all and even fewer people are willing to ask questions. There are many reasons for this. In some cases, it could be because many believe that talking about money is something that is only done with very close family. Other people might feel that discussing finances is impolite or even rude. In addition, some may avoid talking about money or asking questions because they don’t want to seem uninformed or make a mistake while they’re talking. Whatever the reason, it’s true that most people don’t talk about money as much as they should.

When you discuss financial issues and ask questions, you learn more and this information can help you come up with strategies to better manage your financial life.

That’s why, each month, our team answers financial questions on our blog. We want to provide answers for anyone who has money and budgeting questions and help people gain more control over their financial situations.

If you have a question for our team, ask us online on FacebookTwitter or through our website.

The questions here have been condensed or rewritten for clarity and simplicity.

I’m about five years away from when I hoped to retire, but I don’t have enough saved. What can I do?

Many people don’t have enough saved for retirement and, unfortunately, these days a lot of companies don’t offer the types of retirement plans that they once did. This means you’ll need to make sure you’re prepared before you stop working.

If you’re near retirement age but don’t think you have enough saved to retire, there are a few things you will want to keep in mind.

  • What sort of lifestyle do you hope to live in your retirement?
    • The amount you need to save for retirement is different if your plans are to stay at home, tend to your garden, and visit your grandchildren in retirement than if you want to travel, take up a new hobby, or spend your time at movies, theatre performances, and restaurants.
    • Figure out what retirement looks like for you, then focus on saving an amount to make this goal happen. If your reality doesn’t match how you wish to retire, can you adjust your goals or would you rather take more time to save?
  • Can you do part-time or contract work in retirement?
    • Just because you’re no longer working full-time, it doesn’t mean you can’t earn some money to help you with your expenses.
  • If you have debts, you should focus on paying these off as quickly as you can
    • Carrying debt always has the potential to hurt your financial situation, but this is especially true if you’re retired. When you’re living on a fixed income, every dollar you spend matters. If a lot of your money goes toward debt repayment, that means you’ll have less to spend on your other living expenses.
    • While saving for retirement is certainly important, having a plan to eliminate as much of your debt as possible before you stop working should also be a goal. Try to come up with a budget that allows you to do both.

Also, unless there’s a particular reason you need to stop working at a certain age (such as a medical issue), it may make sense to hold off on retirement for a few extra years. While it maybe frustrating to have to work longer than you expected, it may be a better financial decision to stay in the workforce for a bit longer so you can build up your savings and have a more comfortable retirement.

I work freelance. How can I budget when my income changes every month?

It can be difficult to create a budget when you earn a different amount each month. However, it’s certainly possible.

One strategy is to figure out the average you earn each month, then create a budget to live off that amount. If this is the path you take, you’ll need to make sure that you save the extra money from months where you earn above the average so you can still afford your expenses in the months when you earn less.

Another strategy is to budget based on what you earned the previous month. This means you’ll need to adjust your budget every month based on the new numbers, depending on what you earned the month before.

A third option is to create a budget based on your lowest monthly income. Look at how much your earned each month over the last year, then create a budget based on the lowest amount. If this is possible, you’ll be able to put more into savings in the months you earn more. However, depending on your situation, living off the lowest possible amount might not make financial sense.

No matter what strategy you use, it’s important to put some money aside each month for emergencies. Freelance income is typically less stable than having a full-time job, so you’ll want to have savings available just in case.