Would you like to take a vacation this summer? Do you want to give gifts to special friends and family this year? Would you like new furniture, car, or home remodeling project? These are all examples of family goals for which you can plan.
When do you want to realize your goal? Planning a June family vacation that costs $1000? How can you save the money? If you are paid every two weeks (8 paychecks) you will need to save $125 from each paycheck to have the $1000 for a mid June vacation. To travel in August, you only need to save $85 from each bi-weekly paycheck (Divide 12 paychecks into the $1000).
By breaking down a large amount of money into small amounts from each pay check, a family goal becomes more attainable. You can do the same for any occasional expense like auto insurance, car registration, property tax, summer camp, beginning of school costs, etc.
Think also about long term goals. If your child will be ready for college in 10 years, you could save $10,000 if you put away $40 from each bi-weekly pay check for those 10 years. The investment return will grow this amount further.
The same is true for retirement funds. Would you like to add $100,000 to your retirement investments? If so, how many years do you have until retirement? If you have 30 years, you could invest $67 per month with an average yield of 8% rate of return or $120 with a 5% rate of return. For those with 10 years to retirement, it will take $547 monthly with an 8% average rate of return or $644 per month at 5% return.
The group who can invest the least are those with 40 years or more to retirement. A $29 monthly investment with an average rate of return of 8% or a $66 investment at 5% will yield $100,000 in 40 years. It is called the time value of money. When time is on your side, you can invest a small amount and have it grow by just leaving it untouched in a secure investment.
To learn more, visit ISU Extension -- Financial on their statewide Web site.
Ruth; Deb; Meridith
4/30/2006