Kaye says investors should make sure they're using their flexible spending accounts efficiently. And biweekly mortgage payments are helping many AEPG clients save money on a few years of a 30-year mortgage or a couple of years on a 15-year mortgage.
Brennan also has frequent conversations with clients about mortgages, especially when they're nearing a remaining balance of $50,000. If your money is earning just 1% in a bank account, paying off a 5% mortgage may be a good move if that bank account will still have an adequate balance for emergencies, she says.
Brennan believes in dividing savings into three pools: zero- to three-year money in safe and secure assets (including CDs, money market funds and sometimes short-term bonds), three- to six-year money mostly in debt instruments, and seven-plus-year money in equities. Staying three years ahead of cash flow needs, a strategy she has pursued in her portfolio since the high tech bubble burst, can help investors be prepared if there is another terrible bear market, she says.
She also suggests that clients complete the necessary paperwork now for future access to a home equity credit line should they face an emergency down the road such as a job loss.
Bonuses and commissions should be earmarked for particular savings goals such as retirement or other options, says Brennan. If you want to buy a second home, she suggests setting up a separate account for that purpose. "It's more tangible to wrap your head around," she says.
Finding the right savings and debt mix depends a lot on job security, notes Brennan. Someone with a more secure job may be able to accrue and maintain more debt than a person who works for a company that's laid many people off. Investors should also consider whether they can continue to keep servicing debt once they retire, she says.
Clients who don't have a good sense of where they're spending money may benefit from a free online money management program such as Mint.com, says Brennan. Clients can use it to set up a budget, receive weekly reports and get e-mail notifications if they exceed their spending limits in a particular area.
Although there are often no miracle cures for reducing debt, Brennan emphasizes to clients the influence of discipline, sacrifice and delayed gratification. And sometimes people just need to speak with a coach or another person who they can be accountable to, she says.
Brennan says that a financial planning firm she worked for early in her career required her to keep a personal budget to get a good understanding of cash flow and learn what it felt like to be a client. She recalls keeping track of McDonald's and 7-Eleven receipts. "Boy, is it an eye-opener," she says.