Greetings, and Happy Summer Solstice!  I hope everyone has been able to enjoy the nicer weather.   I am pleased to share this month’s financial planning tips topic: Systematic Savings to Establish or Increase Cash Reserves Developing savings discipline is vitally important to building wealth and achieving many financial goals.  An important characteristic of wealth is that it’s not what you earn, but what you have that matters.  So, save early, save often!   I hope you find this information to be helpful.  Feel free to forward to anyone who may benefit.  Please contact me with any questions, or if you would like to discuss/would like assistance with any personal financial planning topics such as cash flow/budgeting, health care, taxes, insurance, investing, college/retirement planning, estate planning.

Systematic Saving to Establish or Increase Cash Reserve What is systematic saving?As its name implies, systematic saving is the process of saving a portion of income on a regular basis. It is important because establishing or increasing a cash reserve should be the first savings objective of a financial plan. Further, most people do not save on any systematic or regular basis, so the plan’s long-term success is likely to benefit from early development of this excellent habit. Pay yourself first For those who do not yet have financial security and independence, systematic saving and building a cash reserve are the first steps (managing debt is a close second, except in dire situations). You should look at systematic saving as paying yourself before you are tempted to spend it elsewhere. Money spent is money that usually must be replaced by working for it. As the adage goes, a penny saved is a penny earned. The benefits of automatic savings With an automatic savings plan, you formally arrange with an employer or financial institution to set aside periodically a specified amount of money from your income or an existing account. This is different from simply planning to save regularly on your own, which requires that you take action on your own to set aside the specified amount each time. Automatic plans are preferable because the transactions are made by others and the temptation to divert funds (out of sight, out of mind) is reduced. However, planning for periodic savings, which is often part of a budgeting process, is better than not saving at all, especially if the routine savings amount is viewed as a mandatory bill payment. Automatic savings also is more convenient, since it’s handled by others. Automatic payroll savings plans Today, many companies offer a payroll savings plan as an employee benefit. These plans automatically withhold an agreed-upon amount from each paycheck and deposit it in an account on behalf of the employee. The employee usually is free to start and stop the withholding process and to change the amount withheld, provided changes are within reason and according to the plan’s established guidelines. Automatic account transfers Most financial institutions offer depositors an opportunity to have funds automatically moved between accounts on a periodic basis. While not a savings plan as such, automatic transfers provide a convenient way to save, regardless of the objective. These plans tend to offer significant flexibility in starting, stopping, and altering the amount being transferred, plus a selection of several types of accounts. Banks and credit unions–Many people keep a checking account and a savings account at the same institution, usually to capitalize on fee discounts and other benefits. In addition to basic savings and checking accounts, financial institutions also often offer money market deposit accounts. They also may have other types of term deposit accounts. Having multiple accounts at one institution can facilitate having a specified amount transferred periodically to an account you designate for cash reserve savings. Example(s): Jane arranged with her employer for the automatic deposit of her paycheck into her checking account at the ABC Bank. She now can request that the bank automatically transfer $500 each month to a money market deposit account that she also has set up as part of her cash reserve. Brokerage firms–More and more, brokerage houses and large mutual fund companies offer accounts and services similar to those of banks (the reverse is also true). Consequently, you will often find opportunities for automatic payroll deposit and automatic account transfers outside of banks. If you hold investment securities with a brokerage, for example, you might arrange to have earnings from those securities automatically deposited to a money market mutual fund rather than automatically reinvesting the earnings. However, be aware that unlike bank accounts, these accounts do not qualify for insurance by the Federal Deposit Insurance Corp. (FDIC). Caution:  Don’t confuse a money market deposit account with a money market mutual fund; a money market fund–even one sold by a bank–also is not FDIC insured. It’s possible to experience a loss in a money market fund, though funds typically will go to great lengths to avoid letting their share price drop below the standard $1 per share. Obtain and read a fund’s prospectus (available from the fund) so you can find out about its investment objectives, risks, charges, and expenses, and consider them carefully before investing. Caution:  Be cautious of tax implications here. Tax laws change frequently. Budgeting for regular savings Whether or not you use formal budgeting to manage your financial activities, you can plan to contribute a specific sum regularly to your cash reserve. If you do use a budget, think of the amount you save as a regular expense, similar to other high-priority expenses. Match your savings approach to your needs When implementing a systematic saving plan, begin by selecting an approach that best matches your needs. Example(s): Jane’s bank offers money market deposit accounts whose interest rates are higher than those in her employer’s payroll savings plan. The deposit account’s minimum balance requirement of $2,000 is not a factor for Jane, so the bank option is her best choice. You may find that you need a more aggressive approach to saving than a single-step approach can provide. You can increase your savings rate by adding a new approach to those already in place. Example(s): If the automatic savings that Jane arranged with her bank is insufficient to achieve her goal within her time frame, she can also arrange for dividends from stock shares she inherited to be automatically held in her account instead of being reinvested. She can then move these funds into her cash reserve once a significant sum has been accumulated.

IMPORTANT DISCLOSURESBroadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014.