Kelley C. Pyles, CFP

Financial Planning, Retirement Income

Journal

6 Steps to Create a Successful Budget

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You have probably been told to use a budget most of your adult life. Even though a budget is the best way to manage your finances, it often feels like a dirty word and starting one can feel overwhelming. So, for the sake of being positive, let’s call it an expense plan. There! That sounds better!

Are you worried that you’re overspending or under saving?

The best way to reach financial freedom is to know the state of your finances and create a solution that you can control! Learning how to design and follow an expense plan could eliminate that stressful feeling you get sometimes after making a purchase. You can do it – one step at a time!

What is an expense plan?

An expense plan is a plan you create to determine how much money you receive each month and how much you spend.1

Popular methods:

  1. The 50/30/20 Plan
  2. The Envelope System
  3. Pay Yourself First
  4. The Zero-Based Plan

We’re going to use the 50/30/20 method in our example, but you can learn more about different types of expense plans.2

What is the 50/30/20 Plan?

This basic method is super easy to follow. You split your expenses into 3 categories.

Graphic provided by Better Money Habits®

Be sure to check out Step 6 so you don’t miss how to put your plan into action!

Step 1: What is your net monthly income?

Your income sources look different at different stages of life. The key is to use your net income: what you have available to spend after taxes.

Pro Tip: If you are creating a plan for you and your significant other, include the total household income.

Common sources of income:

  1. Employment Income (W2 or W9)
  2. Retirement Account and/or Annuity Income
  3. Social Security
  4. Other Income: Rental Income or Investments/Dividends

Step 2: What are your recurring Necessities?

This is 50% of the pie chart. Needs are expenses that you must pay to survive. They are typically recurring bills, either monthly or annually.

Pro Tip: If they are annual, be sure to divide by 12 for the purposes of your expense plan.

  1. Housing: Mortgage, Rent, HOA Fees, Homeowners Insurance
  2. Other Housing: Electric, Water, Gas
  3. Groceries and Prescriptions
  4. Car Payment, Car Insurance, Gas
  5. Health Insurance Premiums
  6. RV and/or Boat Payments or Insurance

Be sure to review all your banking and credit card statements to ensure you don’t leave out any of these costs by accident.

Step 3: What are your Wants?

Remember this should be 30% of your expenses. Some of these may feel like needs, but if you had to, these items could be reduced.

  1. Internet, Cable TV, and any Streaming Services
  2. Shopping
  3. Vacations/Travel
  4. Golf, Memberships, Clubs
  5. Restaurant Dining

Pro Tip: Not sure how much you’re spending? Look over your last 3 months of banking and credit card statements – the total may surprise you.

Step 4: Commit 20% to Savings and Debt Reduction

20% may feel excessive, but this money will save you in stressful situation!

Use the money to…

  • Reduce your toxic debt, which is anything with a high interest rate: credit cards, car payments, and home equity loans.
  • If you’re still saving for retirement, this money will help fund that.
  • Use this money to establish an emergency fund to cover unexpected expenses like medical bills, home and auto repairs, and unexpected family expenses.4
  • Perhaps one of your aspirations is to fund a life insurance policy to leave a family legacy.

The ultimate goal is to reduce your anxiety and ensure you don’t outlive your retirement money!

Pro Tip: If you want to make a large purchase like buying a vacation home or an RV, increase your savings percentage to reach your goal sooner!

Step 5: Balance Your Expenses

Now that you’ve collected all the information you need, subtract your 50/30/20 expenses from your monthly income.

If you’re over… (expenses exceed income)

  • Don’t worry! We can make adjustments.
  • Reduce your “Wants” – Maybe your wants must be 20% of your budget based on your unique situation
  • Try to Reduce your “Needs” – Can you lower your home and auto insurance premiums?
  • Don’t get discouraged. Remember that some of your “Necessities” may be short term because you will pay off your car loans before you know it!

If you’re under… (income exceeds expenses)

  • Increase your Savings
  • Plan an extra trip!
  • Still have extra? Balance the extra between the Wants & Savings

Pro Tip: Be realistic – creating a plan you can adhere to is vital. Each small step now leads to a huge win!

Step 6: Sticking to an expense plan can feel like a daunting task, but you can be successful!

Creating an expense plan without tracking your monthly transactions is like planning a road trip and leaving the RV in the driveway. Take control of your finances!

  1. Easily manage your expenses by using a free spreadsheet template!
  2. Want to create your own spreadsheet from scratch? Find some Pro Tips here
  3. Not a spreadsheet person? Check out popular mobile budget apps

You will need to make adjustments along the way.8 This doesn’t mean that you’re not doing it right. It means that you’re on top of things and life changes. You know yourself better than anyone else, and your financial goals are worth achieving!

We are always here to help you! Start your financial planning today by contacting us for a free consultation.

Sources:

  1. https://www.lightroompresets.com/blogs/pretty-presets-blog/8129895-budgeting-tips-free-budgeting-worksheet
  2. https://consumer.gov/managing-your-money/making-budget#what-to-know
  3. https://www.nerdwallet.com/article/finance/how-to-choose-the-right-budget-system
  4. https://bettermoneyhabits.bankofamerica.com/en/saving-budgeting/creating-a-budget
  5. https://www.nerdwallet.com/article/finance/how-to-budget
  6. https://www.nerdwallet.com/article/finance/free-budget-spreadsheets-templates
  7. https://www.thebalance.com/basic-monthly-budget-worksheet-1289585
  8. https://www.nerdwallet.com/article/finance/best-budget-apps
  9. https://www.ramseysolutions.com/budgeting/how-to-make-a-budget

Comprehensive Financial Planning

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What is Comprehensive Financial Planning?

Most of us spend time focusing on the ups and downs of our retirement accounts.  However, it’s important to remember that investments are only one piece of a rounded, healthy financial plan.  What’s the point in having all that money if you neglect to protect it from excess taxes, inflation and health related catastrophes?  Your nest egg could dwindle quickly without comprehensive planning.​

When we meet with clients, we follow a careful 5-step planning process. You won’t be pressured into becoming a client on your first appointment. We want to get to know you and your goals or concerns. Likewise, we want you to get to know us. It’s so important to build a relationship of trust and mutual respect to build your plan together. We don’t skip steps nor do we rush you through the planning process. We work at your pace to be sure you understand your plan through every step of the process. 

If your adviser isn’t talking to you about maximizing your Social Security retirement benefit, building life-long income, estate planning, preparing for future medical costs, beating inflation, minimizing taxes AND maximizing investments, it’s time to consider a second opinion. As a CFP – Certified Financial Planner™, Kelley Pyles is professionally trained in each of these critical retirement planning categories.  You worked hard to earn your retirement assets so take the time to plan smart. 

Is Your Adviser a Fiduciary?

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Why is working with a “fiduciary” adviser so important?

Kelley Pyles and Royal Fund Management offer independent fiduciary responsibility through an Investment Advisory Representative Licensure. Therefore, we are obligated, as fiduciaries, to act in the best interest of our clients. A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). An adviser who is not a fiduciary, only needs to ensure that their recommendations are “suitable” for you.  They could suggest an investment that provides them with a higher commission that doesn’t perform as well.​

As a Fiduciary Adviser, we are legally bound to put the interest of our clients ahead of ourselves.  We do not get paid more to select one investment over another.  We do not receive commissions (or loads) when selecting investments for our clients.  We are fee-only which means we get paid more if, and only if, your account value increases, so we’re on the same side of the table as our clients. 

Kelley is a dually licensed adviser and can provide insurance solutions as well as investments. Dually licensed advisers are those who have an insurance and a securities license, sometimes referred to as a “total adviser”. They have the ability to offer solutions from both the insurance and securities industries. This may be advantageous to some clients as they can complete their planning with one adviser instead of many. In addition to their insurance license, they will either be a Registered Representative operating under a suitability standard or an Investment Adviser Representative who is obligated to act in the clients best interest, operating under a fiduciary standard.   

Kelley is also a CERTIFIED FINANCIAL PLANNER™; therefore, she has a fiduciary responsibility to clients in all aspects of the planning process. Please note, we do receive commissions for insurance products (non-investment products).

Today anyone can call themselves an insurance or financial adviser. But the reality is that while many of these individuals may be able to sell you financial-related products, not all advisers are created equal.

If you’d like to work with a fiduciary adviser, call Kelley today at 352-751-4590 to schedule a free no-obligation consultation. 

Top 3 Challenges to a Successful Retirement

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Navigating Retirement Challenges is our #1 Goal!

#1: Historically Low Interest Rates

Investments that your parents and grandparents relied on such as CDs and bonds are earning less money than in the past. Today’s retirees may have to consider other alternatives to safeguard and grow their money. If you’re concerned about low interest rate returns, it might be time to consider some alternatives.  We understand how to navigate our current low interest rate environment and utilize strategies that make sense in today’s market.

#2: Fewer Employer Pensions means More Pressure on the Saver

The good old days are over.  With fewer and fewer pensions being offered by employers, the burden of planning is now on the saver.  Without the foundation of a pension to lean on, the decisions we make regarding our IRAs and 401ks become more critical.  One big mistake could lead to everlasting regrets.  With stakes this high, it’s critical to get good advice from a trusted adviser before you make big decisions.  We will help you feel good about the future of your retirement plans by talking through your individual goals, objectives, time horizon, and risk tolerance before any decisions are made. We can also help you take control of your 401(k) if you’re still working and contributing. We can help you minimize significant downside risk and help maximize your growth. 

#3: Volatile Markets

The stock market has experienced two major crashes in the last ten years. Big losses are hard on everyone, but they are especially devastating to people near or in retirement. That’s why it’s important for these individuals to lessen the volatility in their portfolios and possibly consider protective measures. Of course, all investments have some degree of risk, but we can limit this risk with the right tools.

While we do want protection, we also want growth! Today, investors need active management, advisers who seek out sectors that are trending today. We compile unique portfolios for today’s investor. Thousands of funds are analyzed for performance, expense ratios, management tenure, risk / reward, and other ratios necessary to evaluate potential. Diversification is a key to our strategy, however, other factors like cyclical opportunities and sector momentum are considered to potentially improve performance.

We believe in a “big picture” fundamental approach. By focusing on the fundamentals; earnings, interest rates, liquidity, etc., we try to take the emotion out of investing. We take a longer-term view of the market and believe that short-term predictions are not practical. We do not actively trade or try to time the market as we deem these techniques as methods that will not add value over time. However, we do take a proactive approach and may increase or reduce portfolio risk during periods of market promise or stress. 

To learn more about how these challenges might be affecting your retirement plan, please call 352-751-4590 to schedule an appointment with Kelley today.