Are All of Your Eggs in One basket?

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Most of us have heard this old saying; “Don’t keep all your eggs in one basket”. This particular idiom comes to mind as Easter approaches. Basically stated; it means don’t focus all your resources in one particular thing, because if it fails, you lose all of your resources. This charged me to focus on this topic and how it relates to not only your investing relationship, but also your banking relationship.
In a recent meeting with a Financial Advisor, who prefers to remain nameless, I came to understand that planning for your future retirement takes some real upfront proactive thinking. First, you need to decide when you would like to retire, and try to imagine what your monthly expenses will be. This is so that you have some idea as to what kind of income you will need. If you haven’t sat down with your investment representative, it is never too early; I assure you. Actually, the sooner you do the better. Most of us are paying into Social Security. And although in my personal opinion, Social Security will still be there in some way, shape, or form; who knows how much of it you will be able to rely on. This is where being proactive and diverse will benefit you most. We cannot afford to rely on Social Security alone.
Look at your current retirement plan or what options you have for creating a retirement plan. Does your employer offer a retirement plan? Are you contributing? How much? Do they offer contribution matching? If yes, are you maximizing that benefit? Talk with your Financial Advisor, generally they suggest someone between ages 20 to 45 should be focusing investments roughly 70% to 80% toward stocks/equities with 20% to 30% toward bonds/income, but as you near retirement between 45 to 55 years old, you should start reducing volatility (risk) by reducing your stocks/equities to about 60% and increasing your bonds/income to about 40%. This of course is very general, as each person is different and what is right for you will be different based on your age and needs once you retire. Be sure to check with your Financial Advisor.

What is…Periodic Savings verses Emergency Savings?
Periodic savings are for expenses you have throughout the year, but not monthly. You should be saving for them monthly so that you have the money when you need it. Examples include vacations, Christmas, birthdays, annual auto tags & registration, property taxes, annual home or renter’s insurance policy renewal.
Emergency savings are just what the name implies. Emergency savings are saved for the long-term and are used when you have a job loss or short-term medical leave, large unexpected auto or home expenses or need to make repairs. Here at Apprisen, we talk a lot about the importance of having an emergency savings account. YOU can read about an example of why you should invest into an emergency savings account here.

With banking, it is almost the opposite. Banks normally like to have your “relationship” which improves your opportunities with them long-term. When I say relationship, I am referring to your checking accounts, savings accounts, and other services your bank provides. I agree with this as it has proven to be beneficial in most cases. However, for someone just starting to save, having your primary checking and emergency savings account with the same bank can seriously test your discipline. Most of us use on-line banking and it is very easy, almost too easy now, to move money from your savings back into your checking account when you overspent or just want to spend the money.
I am all for building that bank relationship, but for the beginner saver or someone who struggles with this particular discipline, let me suggest that you have your primary checking and periodic savings with your primary bank, but open a separate savings account (emergency savings) with another bank that is not close to home or work. Set up direct deposit from your paycheck to this account. You are far more likely to leave the money there if you set realistic amounts to be deposited when starting out as well. If necessary, start with $15 or $25 a paycheck.
In short, where banking is for the most part an all-in-one mutually beneficial relationship, investing for your retirement should be much more diverse and flexible, changing with your age and life style needs.

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