Monthly Archives: September 2016

This Money-Saving Cruise Ship Tips

Cruise! Just that one little word conjures up images of a luxurious vacation complete with fine dining, exciting nightlife, interesting ports of call, a room of your own – and a single, all-inclusive price. At face value, cruises are tough to beat. But many people, once they step onto the deck, forget how hard they searched for a bargain fare before booking the trip. Suddenly feeling like they have endless credit and bottomless wallets, they flag down every passing waiter to purchase the drink of the day in a souvenir cup, and they buy their suntan lotion on board instead of at a discount store.

Unfortunately, the party ends with a six-page bill tucked under their door at the end of the trip. The all-inclusive bargain has suddenly become very expensive. If you’re looking to save money on your next cruise, here are some tips that will help.

Research and Plan in Advance

On the day you decide that a cruise is in your future, start putting money in the bank to save for the trip. While just about everyone searches the internet to find a bargain vacation, far too many people pay for their trip with a credit card. If you tack 20% interest onto the price of the trip, your trip is no longer a bargain.

One you’ve booked your cruise, do some research on the ports of call before setting sail. Not all of the activities at these places are covered in the cost of a cruise. By doing some preliminary research, you can have a good idea of how to enjoy the local attractions without breaking the bank. Many of the major cruise lines have websites that include prices for the excursions offered at the various ports.

After you have identified the excursions that you think you want to take, do some web research and read the reviews from past visitors. If previous visitors enjoyed the ports of call and the sightseeing options, you probably will too. But be careful that the excursions you pay for aren’t simply activities you can do on your own for cheaper. For example, the cruise line may offer a trip to the beach for $45 per person when you could take a cab to the same beach for $10. Also be careful about paying for sightseeing tours that the cruise line offers. By doing a little upfront research, you can plan your own sightseeing tour for a fraction of the cost of the tour organized by the cruise line.

Set a Budget and Stick to It

If you’ve planned in advance – by buying your suntan lotion and other sundries before departure and knowing which excursions you want to take and how much those trips will cost – you should be able determine an on-board budget and stick to it. Extras to budget in advance for are spa services, food costs, beverages and souvenirs.

Sure the spa may be overpriced, but you’ll be on vacation and, if you know you can’t resist the allure of a massage, plan accordingly. When you go to the spa, be sure to ask about discount rates. Ships often offer special rates on various services at some point during the voyage.

Your extra food costs should be easy to control, since meals are generally included in the price of a cruise. There will be so much free food available on the ship at all hours of the day that it makes no sense at all to buy food at the add-on snack shops and restaurants requiring a fee. Many of those restaurants serve the exact same food you can get in the main dining rooms.

When it comes to beverages, if you just can’t survive on the free beverages – which generally include lemonade, juice, coffee, tea and water – look into the “bottomless” soda option available on most ships. If you like wine with dinner, consider purchasing what you think you might need for the trip on the first night. The wine steward will serve it by the glass and keep it refrigerated overnight.

Avoid the on board internet service or telephones. If you must make a call, wait until you reach a pay phone in the next port. (Keep in mind that you are on vacation. Do you really want to spend your vacation talking on the phone or checking your email?)

Finally, find out about your cruise line’s tipping policy, and plan ahead for the tips. The service staff works hard to give you the perfect vacation, and they don’t deserve to be short-changed because you didn’t budget appropriately.

Try a Travel Agent

For getting a good deal on a cruise, travel agents are a wonderful resource. Look for agents who specialize in cruise vacations. They get a volume discount that generally rivals the last-minute discounts available on the internet, and the really good agents track the prices after you book your trip. If the price drops, an agent may give you a retroactive discount as well. Also, you should work with an agent who has taken many cruises him- or herself and can tell you which ports are safe to explore without an escort, which beaches are close to the cruise ship dock and what other clients thought about the various ports of call.

Bon Voyage!

It pays to remember that taking a vacation doesn’t mean that you get to leave your financial sense at home. If you apply smart financial principles to your vacation, you can take the same trip, enjoy the same ports of call and indulge in the same exemplary service as the passengers who throw caution to the wind. The only difference is, you’ll be heading home debt-free.


Now Saving Money for Big Life Changes

In part one of this article, we looked at saving money – how you can financially plan and prepare for a wedding and for buying your first home. In this next part, we will take a close look at two more life-changing events that require savings: having children and preparing for retirement.

1. Saving for a Growing Family

Our first child is still a few weeks old so I can’t really speak to the day to day expenses, but I’ve been told there will be a lot of diapers. In fact, the stats I looked up told me anywhere from about 4,000 to about 10,000. Rather than recommend how couples should save for having a baby, I can suggest carrying enough life insurance for your spouse to take care of the kid(s) if something happens to you.

My general rule is to plan on about $100,000 of coverage for each child if you are not intending to pay for college. If you are, and you want life insurance to cover that, you’ll need to add about $200,000 for a public university 18 years from now or $400,000 for a private school at some point in the future.

“Well can’t I use a special account for college savings?” Yes, you can, but consider two questions: how much of the education you want to pay for and if your child doesn’t go to college or gets a full ride – what are you going to do with that money? Typically, a 529 college savings plan allows you to save for their education and take a state tax deduction if you use the state sponsored plan.

If you’re going to pay for all four years at a private school you need to start putting away about $1,000 per month (assuming a 7% average annual interest rate).  But in 18 years if your child doesn’t need that money, and it’s in a 529 plan, someone has to use it for college expenses otherwise there could be penalties and taxes on the withdrawals. A Uniform Gift to Minors Act (UGMA) account allows you save for the child’s future expenses and invest however you want to. The money can be used for anything as long as it’s for their benefit. The catch is once they reach the age of majority (18 in Ohio), that is their money to do with what they please.

Another avenue, and the one my wife and I use, is through indexed universal life insurance. The details of such a plan are beyond the scope of this discussion (but your insurance agent would be happy to discuss them with you). In my opinion, it is a tax efficient strategy to help make sure there is money available for college if it is needed. If it’s not, then guess what, there is still cash there and it can be used for literally anything if it’s needed. And if one of us dies before our daughter goes to school, there is a death benefit that will be available if needed. It was honestly one of the better planning decisions we have made together.

2. Saving for Retirement

Retirement savings deserves its own entire discussion but here are a few pointers I can give if you are just starting to think about this kind of goal:

  1. In your early years your “plan” will change several times. Be prepared to make adjustments to that ideal retirement picture you have when you go through any of the above situations or change jobs.
  2. Enroll in the 401(k) and contribute at least the amount your employer is matching. In my opinion, that’s free money and you’re never going to be unhappy that you put it away. (For more, see: 5 Things to Think About When It’s Time to Retire.)
  3. In addition to your 401(k), establish a relationship with a financial advisor and ask questions about other types of retirement accounts – a traditional IRA, Roth IRA, annuity products, general investment accounts, etc. You can Google away at all of those things and probably develop a pretty good understanding. But absolutely nothing will compare to the conversations you’ll have about your money and your future with someone that you get along with. When I Googled my sore shoulder, in about an hour I was pretty sure I had sciatica. My chiropractor told me that I just needed to sit up straight. He was right.

Once you have a clear goal in mind about what you want your money for and what you need it to do in the meantime, you’ll actually enjoy saving. And after you and your financial advisor have set up specific accounts for specific events, you will take an active interest in the types of investments you have and how they perform. So don’t just put money into a savings account for the sake of saving, be sure that you’re making the right decisions based on the things you want to accomplish.

Securities and investments advisory services are offered solely through Ameritas Investment Corp. (AIC). Member FINRA/SIPC. AIC and Decker Financial Group/Creative Financial Partners are not affiliated. Additional products and services may be available through Joe Decker or Decker Financial Group/Creative Financial Partners that are not offered through AIC. Representatives of AIC do not provide tax or legal advice. Please consult your tax advisor or attorney regarding your situation.


These Benefits of Doing a 30-Day Financial Detox

“If I can live for a dollar a day—at least from a food cost standpoint—it’s pretty easy to earn $30 dollars in a month, so I’ll probably be ok.”

–Elon Musk

Long before Elon Musk became a billionaire, he was a college grad with big dreams, just trying to find a way to survive. He figured that he could live pretty cheaply with just the bare essentials, and by doing that he could forego getting a job, at least initially. Instead, he wanted to devote all of his time and passion toward his business. Obviously, it all paid off eventually, because when he sold his stake in PayPal a few years later, he pocketed a cool $165 million.

Hearing Musk’s story recently inspired me. No, not to live on oranges and hotdogs for a month like he did, but to re-evaluate everything I spend money on. I wanted to know how much it really took me to live and how much “fluff” had built up over time into my monthly spending. Now, as a general rule, I like to think of myself as having it together financially, more or less. I am a financial planner, after all, right? But like the doctor who fails to exercise and eat right, just knowing the right things to do doesn’t mean I was actually doing them. And after keeping a fairly strict budget for several years when I was younger, I’m afraid to admit that the budget had gotten a little bloated lately.

When I go back and think about those days immediately after college, I realize, like Elon Musk, I had no choice but to live on a budget. But when I compare them to now, I realize that, despite my best intentions, my budget had grown into a lethargic, pot-bellied coach potato.

It was time to get back in the financial gym.

30-Day Financial Detox

So, I decided to do what I like to call a “30-day financial detox.” Over the course of 30 days, I would go through every expense and ask myself a simple question: “Do I absolutely need this?” If the answer was no, I cut it. If I wasn’t sure, I cut it. There were no hard decisions to make—cutting it was the default answer, if there was any doubt at all. If I truly did need something, then I would take a hard look at it to see if I could reduce it somehow. Basically, since this was only a 30-day experiment, I knew that it wouldn’t be the end of the world if I didn’t have some little luxury in my life for a little while.

Tons of things would get cut over that time period—my gym membership, subscriptions, cable TV, Netflix and Hulu, all of this got the boot. Now that the 30 days are over, a few of these things have already come back, and maybe one or two more will get added back in the future, but overall I’ve permanently reduced my monthly expenses by a significant amount.

The Benefits of Reviewing Monthly Expenses

Here are some of the benefits I’ve seen so far:

  • Knowing Your Monthly Nut — I have a pretty good idea of what my basic monthly expenses are now. This is important to know because when you get ready to retire, you need to know how much income you’ll require to at least cover your bills.
  • Cutting Costs — I’ve been able to cut costs significantly in several areas. My car insurance went down, just because I called them and asked them to see if I qualified for a better rate. I also discovered that they accidently billed me too much, and I was able to recover that cash as well.
  • A New Perspective — I think differently about my expenses now. Instead of asking if I have the money for this or that purchase, I think more about if I can save this amount and therefore get that much closer to financial independence. Will I think that way forever? Probably not, but I can always do another financial detox in the future, which will hopefully re-orient my perspective towards savings again.
  • Finding Cheaper Alternatives — I found that in some cases I could find cheaper equivalent services than what I had before.
  • A Simpler Lifestyle — Most importantly, I discovered that I didn’t need to spend money to be happy. By cutting down to a simpler lifestyle, I found that I began to focus on spending money on things that actually contributed to my overall sense of well-being. Sometimes spending is just a mask for other areas of unhappiness, and we can only deal with the real problem by facing it head on.

So how about you? Everyone’s circumstances are different, and I am certainly not saying that everyone should be living on rice and beans all the time. But if you’re anything like me, you may find that even though your income has gone up over time, it’s still difficult to save and make progress on your financial goals. That may be because miscellaneous expenses have crept in, largely unnoticed, as your income has gone up. Many of these expenses are monthly, quarterly or annual costs that just get deducted from your credit card automatically. So, by re-evaluating these costs with a financial detox, you may find that your cost of living will go down substantially, and you’ll start making regular progress towards your goals.

If all of that sounds like you, maybe a 30-day financial detox would be just the kick-start you need. All I know is that it worked for me.

The Millennials Will Be Still Be Working

For the longest time, 65 has been the standard retirement age. Not everyone retires at that time, but enough to make it the average. But for Millennials, 65 is going to be early retirement – very early retirement.

Recent research indicates that Millennials may have to work until 75 to fund their nest egg. Here we’ll break down of those findings, and what can be done about it.

Why Millennials Will Have to Work Longer

Unlike any other previous generation, Millennials face an onslaught of financial challenges. Student loans, rising rents and lower starting salaries point towards a depressing fact – the average Millennial will struggle to fund their retirement. The Great Recession has also made recent graduates wary of investing in the stock market, even though that’s where their money can grow the fastest.

Not convinced? A study by NerdWallet found that Millennials will have to work until age 75 to fund their retirement, compared to current seniors who only have to work until 62. That’s just one piece of research in a growing consensus, and they all point towards the same trend.

Jason Kirsch, author of “The Millennial Advantage” has said in the past that retirement was based on a three-legged stool: pensions, Social Security and personal savings. According to Kirsch, retirees used to get more out of Social Security than they contributed. That’s no longer true.

What Millennials Can Do

The silver lining is that Millennials are still young and can catch up for retirement. If they’re willing to start investing now, that is.

“In reality, if you invest early and prudently, you won’t need to save as much to get to the same point,” said Certified Financial Planner Hui-chin Chen of Pavlov Financial Planning. “The problem is most Millennials don’t get to save early. The less you save during your working years or the later you start, the longer it takes to save enough for retirement.”

So here are some strategies Millennials can use to help ensure they won’t still be working in their golden years:

  • Invest, don’t save. A survey by State Street discovered that 40% of Millennials prefer to keep their savings in a liquid account instead of investing. That’s why they miss out on the returns they’ll need to adequately secure their retirement. A high-yield savings account has an annual percentage yield (APY) of 1%, while an S&P 500 Index fund has an average 10-year return of 6.82%.

  • Save most salary increases. Younger workers see higher gains in their salary as they jump from entry-level staffers to management. Those increases can be substantial, and Millennials can capitalize by setting aside most of that money in a retirement account.

  • Spend less on housing and transportation. Those two categories make up the bulk of household expenses. The less Millennials spend on rent and car payments, the more they’ll have to save, invest and pay off debt.

The Bottom Line

In many ways, Millennials are already facing a huge disadvantage. They’re not making as much as their parents, and just about everything is significantly more expensive. Getting a head start on retirement is a bigger challenge than ever before.

Thankfully, all is not lost. If you are a Millennial, you can better the odds of retiring on time by saving more than 10% of your salary, investing that money and being aggressive in your youth. It’s either that, or embracing the daily grind well into your 70s. Which will you choose?