Let's Think "Outside the Box" Ways to Save

Tip #2

Get Out of Debt.

It's time to stop borrowing, pay off debt and regain control of where your money goes. Without car, student loan, credit card and installment loan payments that likely total $800-$2,000 per month, it would be easy to save for purchases and a secure retirement.

Start now. It won't happen overnight, but you can be debt-free and financially secure - regardless of your current income and debt levels.

If you have adequate equity in your home, you may want to consider refinancing your mortgage and using the equity to eliminate the other debt. The interest rate is likely much lower, and mortgage interest is tax deductible. If this is not a viable option for you, the following debt elimination strategy is effective. First, save $500-1,000 in an emergency fund so you have a small safety-net during the debt-elimination process. Second, tackle debt using the "snowball" approach, as follows: 


  • List all debts in ascending order, from smallest balance to largest. (You may also order them by highest to lowest interest rate, if you prefer.)
  • Commit to pay the minimum payment due on every debt.
  • Determine how much extra can be applied towards the smallest debt. (The more you can commit, the faster you will be out of debt.)
  • Pay the minimum payment on the smallest debt, plus the extra amount, until it is paid off.
  • Once a smallest debt is paid in full, add the amount you were paying on the first debt to the minimum of the second smallest debt, plus any extra you can afford.
  • Repeat until all debts are paid in full.

By the time the final debts are reached, the extra amount paid toward the larger debts will grow quickly, similar to a snowball rolling downhill gathering more snow. 

Let's Think "Outside the Box" Ways to Save

Tip #1

Change Your Tax Withholdings.

Are you giving the federal government an interest-free loan every year? If you get an annual refund from the IRS, the answer is yes. Your employer deducts federal income taxes from each of your paychecks based on the number of “allowances” you claim on your W-4* (the form you filled out when you were hired). Many people claim zero allowances—having the maximum amount of taxes taken—and then file their return with exemptions and other deductions to receive a tax refund. Essentially, they are overpaying their income taxes. Why not pay an amount closer to your actual taxes and increase your weekly discretionary income and have more to save and invest?

People love getting a tax refund. Who wouldn’t love having $1,000, $2,500 or even $5,000 deposited into their checking account each spring? Many even argue that their tax refund IS their savings account. They use their annual refund for larger purchases, vacation, to pay off holiday debt, etc.

But here’s the brutal truth: It’s not smart savings and if you are not in a position to handle an unforeseen circumstance, you don’t need to be going on a vacation or buying a big screen TV. Above and to the right is an actual example of how one person began investing over $6,000 per year without feeling a strain on her day-to-day living or monthly budget.

By simply changing the allowances on her W-4 from zero to two, she was able to start investing 10% of her income ($166.67 bi-monthly), but her take-home pay only decreased by $45. Plus, her company—like many companies—matches her contribution up to five percent. Hence, her actual annual investment is $6,000.

*This example is intended as an illustration only and does not reflect the performance of any specific investment and should not be considered financial advice.

How Much Do I Need in Cash Reserves?

Industry experts say that 3 to 6 months of your fixed and variable expenses should be in your cash reserve. At Beacon Financial Group, we believe that it depends on your comfort level, and that is something that is going to be different for every client. Some people want $5,000 - $10,000 liquid, knowing that they have other sources to go to, and others want $50,000, no matter what.

As Beacon Financial Group advisors, our job is to show clients how to possibly increase the rate of return on the investment, without taking unnecessary risks, and to find ways to reduce the amount of taxes they are paying on their investments. Inflation is a part of life. There is not much we can do about it, but we can come up with strategies to help outpace inflation and get the money working harder.

Everyone needs to have a cash reserve, and they need to decide on the amount. Excess money sitting in that position is not a good idea.

For example: If someone has $50,000 sitting in a checking or savings account, and they have determined that they only need to keep a $15,000 cash reserve, then they have $35,000 earning $0 while being eaten by taxes and inflation.

Financial planning means putting all the pieces together-- starting with cash reserve and excess liquid money.

Where will you invest your excess cash reserve?

For more information, contact Beacon Financial Group to speak to an experienced, licensed advisor: (888) 769-4333 or