Why a Budget is your Best Friend

For most people the cost of managing how they live their life is more important than managing their investments. The fact is, without any type of savings the returns that you’re going to get aren’t likely to be anywhere near sufficient or close to your goals. The solution: Creating a budget and using it. Frankly, it’s one that most people dread hearing about but if the surest way to control spending, set realistic goals and secure your financial future. Figuring out your average household expenses and thus your average family budget is critical.

Below we have a series of questions from real clients and we’re going to give you our answers to those questions. Hopefully this will help you to realize just how important the budget is and spur you to either create your own or talk to your financial professional to help you get one created. Enjoy.

Q 1: How do I get started with a budget?

Just like with anything else in life, you need to know where you are before you have the information you need to go someplace else. The best way to do this is to start keeping track of all of your expenses. And by all, we really mean ALL of your expenses. Big or small, if you can follow your expenses for at least a month you’ll get a “snapshot” of how much you’re spending every month, information that will give you a basis for your new budget.

Q 2: What is the best way to stick to a budget?

The best way to stick to anything, including a budget, is to intentionally monitor what you’re doing, either on paper or with the help of a computer program or app, and keep doing it until it becomes a way of life. That’s the only way to really change your behavior and to help you “stick to” your budget.

Q 3: What tools are available to help me budget?

There are many websites online including Mint.com and Youneedabudget.com where you can easily set up a membership that will set boundaries for your spending, send you email alerts if you go over them and help you determine what kind of trade-offs you can easily make. There are of course our programs like Microsoft Excel and other budget programs that you can purchase but the most important thing is to find one, no matter what it is, and use it.

Q 4: How do I budget for a large purchase?

First off, having a budget in place will help you to do this much more easily. Secondly, whether it’s an automobile, new home or college fund, you need to first determine what’s realistic. If, for example, you want to put aside $10,000 as a deposit on a new home, you need to determine how much you can put away per month in order to reach that goal and then, of course, get started. In other words, you need a plan and your budget will help you to put that plan into action.

Q 5: What can I do to keep from being overwhelmed by my budget?

The truth is that many people feel “handcuffed” by their budget, especially if it’s too strict. If someone isn’t happy with their budget they will easily stray from it or trash it completely. With that in mind, budgeting a little “splurge money” every month is a great idea to allow you to have a little fun and not destroy your budget in the process.

Q 6: Is there one specific key to successful budgeting?

Since everyone is different, everyone will have a different “key” to being successful with their budget. Most professionals will say that you need at least 2 months to really get on track but, in some cases, it may take longer. Working with a financial planner is a good idea because they will hold you accountable to your plans and goals and keep you committed to what you set your mind to.

In the end, the goal of budgeting is simply to capture wealth and usually money to make more money. In order to do that you need to closer look at how your living as well as what your plans are for living in the future. The only way to do that, as we said, is to have a budget. If you do, you’ll find that setting, and keeping, financial goals is much easier.

How your Upbringing Affects your Money Habits Part 2

Welcome back for Part 2 of our 2 Part series on how your Money Habits can be affected by your Upbringing. In Part 1 we talked about how the fact that your parents spoiled you rotten  (or never spoiled you at all) could affect the decisions you’re making now when it comes to money and your finances. Today were going to be doing and talking about more of the same so, if you’re ready for little financial therapy, let’s get started. Enjoy.

  • Mom and dad never gave you any Lessons about Money.  This is probably the most common problem and usually it’s due to the simple perpetuation of your parent’s own lack of a financial education. Unfortunately, when it comes to money it’s almost as big a taboo to talk about as sex and, as far as women are concerned, being kept in the dark about household finances has been a custom for generations.  This has led to generations of parents avoiding talk about money matters  either out of sheer ignorance or because they prefer not to.

This leads of course to  a new generation of people who aren’t educated when it comes to finances and who tend to either under save, overspend, avoid investing or avoid financial planning completely. The reason is that the new generation has no foundation of knowledge about money management and are left to basically learn on their own and learn from their mistakes.

The best way to deal with this of course is to educate yourself, something that is much easier in today’s Internet age. Hiring and working with a professional and experienced financial advisor is also a great idea and can help you either get back on your financial track or get started down the right path financially. If you can get a referral from a family member or friend to someone who is qualified and that you trust all the better. Also, if you’re keen on making sure that your kids don’t end up in the same situation, get them involved in financial decisions (when appropriate) and help to educate them while they are still young.

  • Your mother and father lived “high on the hog”. Perhaps because they were deprived as kids and were compensating for that fact or maybe they just felt like they had to “keep up with the Joneses”, your parents spoiled themselves  on a regular and ongoing basis.

The effect that this type of behavior can have on you as their adult child is that you live way beyond your means. Even though most people will tell you that they “would hate to turn out like their parents” the fact is that they usually do and, if you’ve grown up in a home where your folks “lived at large” it can make it particularly challenging for you, or anyone else, to adapt to a modest lifestyle.

  • Your mother was completely dependent on your father. No offense to your mom (she’s probably a very sweet lady) but, if she was completely taken care of by your dad and never had to worry about money at all you yourself could be expecting the same.   Subconsciously you might be thinking “why should I struggle if mom didn’t have to struggle?”   This type of thinking usually results in irresponsible behavior and procrastination with money because  you are assuming that someone else will (eventually) come in and “rescue” you financially.

If this is you then you definitely need to get back to reality, stop waiting to be saved and, at least as far as your finances are concerned, save yourself. Financial independence can be incredibly satisfying and also inspirational to your own children at the same time.

  • Your dad and mom were divorced. Unfortunately, many families today are “broken” families and divorce issues can lead to many different types of psychologically-based financial issues.  In many cases what this does is cause you to become more determined to live “happily ever after” and, while this isn’t particularly a negative thing, it can also lead to you to rush into things like getting married, buying a house and starting a family much too early.

Of course if you rush into these things you may find that you are suddenly living way beyond your means and in debt up to your eyeballs, a situation that can bring you full circle and lead you to divorce as well.

The solution is to do your very best to be financially independent whether you are married or not. Maintaining separate bank accounts for spending, investing and saving is a good idea and, while you’re at it, contributing to your own IRA or 401(k) as well.

Well, that wraps up our 2 Part financial therapy session. If you’ve seen a bit of yourself in any of our examples, and if they touched a little too close to home, we apologize but we hope that it has made a positive impact.  More than likely your parents were doing the best they could and always wanted the best for you. In any case, it’s never too late to start new financial habits and not make the same mistakes with your own children. If you have any questions or would like some advice about your own personal finances, please let us know and we’ll get back to you ASAP with answers, advice and solutions.

How your Upbringing Affects your Money Habits – Part 1

Something that most people don’t realize is that how they were raised as children can actually have a big impact on how they make decisions as adults, especially with money. Sometimes the decisions, due to the way mom and dad taught us, are excellent and, sometimes, they are not. That’s not to say that a person can just blame their parents for their problems and their mismanagement of money but, at the root of most adult financial problems, are the lessons that they learned as children from their mother and father.

With that in mind we put together a list of relatively common parenting behaviors that, in most cases, can have a negative influence and how a person handles money and their finances as adults. We guarantee that it will cost you a heck of a lot less than therapy, so enjoy.

  • Your mom and dad were extremely Frugal. It might’ve been that they were keeping a tight budget, or that they were trying to teach you a lesson. It might also been that they decided to put themselves first financially or just didn’t have a whole lot of extra money. Whatever the reason, your mom and dad seemed to completely deny you of all the things you wanted when you are a child.

If this was your situation as a child, as an adult you will tend to overspend in order to compensate. Indeed, many children that feel they were deprived when they were younger will binge spend to make up for. Just as we’ve heard about the kid who rebelled against their strict parents and went crazy in college, acting out with your money because of your parent’s frugal ways is not uncommon. Your best bet in this case is to not let the cycle continue with your kids and make sure that, when making money decisions that affect them, you let them in on the reasoning so that they can better understand and not feel resentful when they become adults.

  • Mom and dad Spoiled you rotten. Possibly because they were deprived when they were children, your parents overspent like crazy on you and you grew up not wanting for anything whatsoever.

The influence that this has on your life now is that you may feel entitled to a luxurious lifestyle. Many children who are spoiled grow up to expect that they will, and should, get whatever they want. The problem of course is that they might not have the income to support the lavish lifestyle that their parents afforded them and, in order to make up for it, put themselves into deep debt.

The solution in this case is to realize that having a lot of “stuff” is no substitute for financial freedom and, if you want to avoid going into debt over your head, do your best to live modestly and put your money towards more important goals like retirement savings, purchasing a home or even starting a business.

  • Your folks were very Charitable. If your parents grew up extremely poor or witnessed some kind of trauma as children, it’s possible that as adults they chose to invest their money in causes and organizations that they felt a great affinity for.

While this might not sound “negative” the fact is that even though their hearts were in the right place (and yours might be also) giving away too much of your money due to guilt or obligation can also have a detrimental effect on your finances. Fact is, if you feel obligated to match your parents generosity and can’t say “no” when charitable causes, calling, it could lead to saying “yes” much too often and donating much more money than you can afford to pay.

The solution in this case is to step back, take a look at the charitable causes that you are contributing to and decide which of them really is worth your charitable donations and which is not. Remember that it is not your duty or your responsibility to take care of everyone and, indeed, your real responsibility is to make sure you take care of yourself and your family. When you have a little extra money, then you can take care of others.

Hopefully these first 3 parenting behaviors didn’t blow your mind too much or setback your therapy by too many years. In all seriousness however they are very important to know, especially if you are having financial problems as an adult, and hopefully have given you some insight into what’s causing your erratic financial behavior. If you have questions about personal finances of any kind, please let us know and we’ll get back to you ASAP. Make sure to come back and join us very soon for Part 2. See you then.

The High Cost of Using Cash

It’s been calculated that the aggregate expense to all households in the United States for accessing and using their Cash is $31 billion a year. This astounding number includes the 5.6 hours each year, on average, that people waste simply driving to the location where they get their cash and also $6 billion in foreign ATM fees. Throw in another $5 billion in period account fees and don’t forget the 500 million that’s stolen every year either and you can see that using cash is actually rather expensive.

The old saying “Cash is King” might still hold but, for what most people are paying just to use it, it might be time to change it.

Even worse is that many of the costs that people face to use cash are increasing, such as foreign bank fees. The Government Accountability Office reports that between 2007 and 2012 the cost to use a foreign ATM has gone up over 20%, bringing the average cost to $2.10. Wells Fargo Bank actually charges $5.00 in ATM fees if you don’t have an account with their bank.

Because of these costs and also because electronic payments have become so popular, cash is used in only about 20% of consumer spending today. Although it does come with these extra expenses, there are still a lot of good reasons to use cash including the fact that there are still a few businesses that only take cash and, in some cases, offer a financial incentive to use it. Credit cards and other cash alternatives can also cost more, especially if they have a balance. These have gone up, no doubt, but Greg McBride, senior financial analyst for Bankrate.com, says that there are still a number of ways to avoid the high cost of cash even if you can’t get around using a regular bank account completely.

Free checking accounts, or accounts that offer free checking with minimum balances or direct deposit, are one alternative. Indeed, over 95% of all bank accounts don’t even have a monthly fee as long as you meet their conditions for monthly minimums and using direct deposit. Knowing exactly types of fees that your bank charges is also really important as the average checking account has over 30 different fees and, in some cases, as many as 50!

Another thing to keep in mind is that using credit cards actually offers certain specific protections to consumers, including limited liability for any charges made if your credit card is stolen. Cash is not afforded this protection, which is a very big drawback.

If you always pay your balance is in full every month, a “rewards card” may be an excellent choice for you. Paying your bill off in full every month is vital however because, if you don’t, your rewards card may cost you more in fees than any rewards that you might receive.

There are better travel and cash-back rewards as far as CardHub.com is concerned. They did an analysis recently and found that, for example, Chase Sapphire Preferred Card offers $400.00 cash back if you spend $3000. during the first 90 days that you have the card. Barclaycard Arrival World MasterCard will give you travel credits to the tune of $400. if you spend $1000. in the same time period.

The reason these cards are offering such amazing rewards and cash back is that they are doing everything they can to attract consumers with the lowest credit risk and, frankly, they have a lot of competition. If you’re keen on figuring out which cards reward you the best or give you the most cash back, CardHub.com and NerdWallet.com (among others) offer services online to help you compare offers and cards.

The bottom line is that, while it’s nearly impossible to avoid all of the costs of using cash, there are a number of ways to do it cheaply as well as a number of alternatives to cash that are inexpensive and, in some cases, can actually earn you money. Your best bet to determine what’s best for you is to do your research, ask questions and be aware of the extra fees and costs associated with whatever type of payment you’re using, whether cash or credit.

Expert Advice on Mortgage Brokers

While hiring a mortgage broker is more advantageous for most new homebuyers than working directly with lenders, it still pays to screen them for professionalism. Taking a few minutes of your time to ask your broker some serious questions can you save you from experiencing problems when you are ready to buy your dream home. Following are 10 questions that you should ask your mortgage broker before committing to any terms.

1. Are you affiliated with any lenders?
Some mortgage brokers work with only a limited number of brokers, which places a limit on your available options and prices.

2. Are you licensed or certified by the state?
Nearly every state in the nation requires mortgage brokers to be licensed or certified to ensure that minimum standards have been met and consumers are protected from fraud. For example, an Alabama mortgage broker might need to know laws that relate specifically to Alabama, so whatever state you’re in, ask to make sure that your broker is certified there.

3. Is this the best possible interest rate?
Make sure you are getting the best interest rate possible, and ask whether there is anything you can do to get it lowered.

4. What are your fees?
The fees charged by mortgage brokers can vary widely, so it is important to understand what they are and the total amounts that will be due.

5. What type of mortgage is best for me?
Several types of mortgages are available, but the two most common are fixed-rate mortgages and adjustable-rate mortgages. The one that works best depends upon your specific situation and the economy.

7. How much are my monthly payments?
Once you understand the cost of the home, the interest rate and any associated fees, you must determine whether you will be able to comfortably afford your monthly payments.

8. When are payments due?
In addition to understanding when the down payment, fees and closing costs are due, be sure to ask when the monthly payments are due and whether there is a grace period.

6. Who is my lender?
Even though you are operating through a mortgage broker, you have to know who is originating the loan and what to expect when dealing with them.

9. Is there a prepayment penalty?
To save the most money, you will want to have an option to pay additional amounts on the principal without incurring extra fees.

10. How do I receive a copy of the closing documents in advance?
By law, you are entitled to a copy of your closing documents 24 hours before your closing date so that they can be reviewed for accuracy.

How to Build Credit without Using Credit Cards

Do you have a “thin credit file”? If you do, you’re one of the 25% of Americans who have little or no credit history and don’t use credit enough to build a sufficient FICO credit score. Since having “good credit” (and a good FICO score) is extremely helpful in many ways financially, we decided to put together a blog today to help people who want to start building their credit but either don’t want to or simply can’t get a credit card.

Indeed, there are quite a few ways to build up your credit that don’t require you to have a credit card at all, including credit builder loans, alternative credit scores and Passbook or CD loans. Let’s take a look at those options and see which one may be right for you. Enjoy.

  • Credit Builder Loans. Like a savings plan, Credit Builder loans give you a “taste” of handling credit but at a very low risk to the bank or credit union that’s lending you the money (and also to you) in. In effect what you’re doing is lending money to yourself. For example, you could put $1000 into a bank or credit union interest-bearing account. (This can be done in a lump sum or, if necessary, in 10 – $100 a month payments.) Once that entire amount is deposited you can then use it as collateral to take out a $1000 line of credit, using that money and repaying it as you see fit. You’ll be paying higher interest rates than what you actually earn but the good part is that you’ll get experience working with credit and, if you make sure to pay on time every month, that “positive history” will end up on your credit record.

In the case of a credit builder loan, both banks and credit unions report your history to the Big 3 credit reporting agencies and, better yet, this information will help to build your FICO score.

  • CD Loans or Passbook Loans. Some banks will let you borrow against a Certificate of Deposit (CD) if you have one. Depending on the bank you may be able to borrow up to 100% of the amount in your CD, but some will restrict you to a little bit less. The drawback is that you’re going to have to pay a small origination fee and more interest than what you’re actually earning on the account. You also can’t touch that CD or your savings account until the loan is completely repaid. The good part is that it will show up on your credit record as a “secured installment loan”, something that can help you to build your credit as long as you pay the money you “borrowed” back on time.

As with credit builder loans, CD or Passbook loans will be reported to the Big 3 financial agencies as well as helping to build your FICO score.

  • Pay for Data Reports. If you have always been a renter and never owned a home, paid credit reporting might be a great alternative for you. It gives you the ability to have your nontraditional payment history compiled and then reported to the big credit bureaus like Experian and TransUnion. The reason for the third-party agency is that you can’t report this data on your own and will need help from a pay for data company like Rental Karma or Rent Reporters. While it may cost a little bit of money it’s a great way to get your excellent payment history (assuming that you have one) reported to the big credit agencies.
  • Alternative Credit Scores. There are many other types of credit scores the on the traditional FICO score. Some take into account your utility payments, rental payments and a lot of other financial information that’s not regularly included in your FICO score. As a matter of fact, FICO actually has their own FICO Expansion Score, a score that uses checking account management and other nontraditional data to determine your credit score.

Since some lenders only look at your FICO score and others actually have their own scoring system, these alternative credit scores work better with some than with others. Some scores might still have value for you even if a lender might not see them. For example, an “educational score” will help you keep track of your progress, something that is always important when it comes to reaching any goals that you might set.

eCredable has such an educational score and, once you sign up and list all of your monthly bill information, they can turn that info, and your payment history, into a “score”. They can also take this data and, for a fee of between $20 and $30 per bill, provide verification of your on-time payments to credit agencies.

As you can see there are quite a few different ways that you can build credit without actually having a credit card. If you have any questions about credit, financial questions in general or just want to leave us a comment, please do and will get back to you with advice and information ASAP.

Rules to Protect your Passwords from being Hacked

Did you know that almost 75% of Americans have, at one point or another and a life, been the victims of an Internet crime? In 2012 alone over 9 million people were the victims of some type of identity theft and, on social media website Facebook,  every day over 600,000 accounts are hacked!

With those scary statistics in mind we put together a blog today to help you protect your passwords from being hacked. Lots of advice and great information is to follow and, if you use it, you will reduce the chances that some dirt bag son of a #$@*& is able to get access into your online accounts. Enjoy.

Rule 1:A password that’s easy to remember is also a password that’s easy to hack. Yes, remembering long and complicated passwords is a chore, especially when you are combining letters and numbers that are case sensitive. That being said, it’s vitally important that you avoid using some of the more popular, and extremely easy to hack, passwords that include the numbers 1234, the word “password”, your children’s names and even birthdays.

Rule 2: Use different passwords on different sites. In most cases your email will be used to help reset passwords on other sites so definitely make sure that your email password is a tough not to crack. If someone is able to hack that one, they’ll basically have access to practically every account you own. In other words, it’s vital to create new passwords for each new account and make sure that your email password is  a tough one to crack.

Rule 3: Use passwords that are longer and thus stronger. If you use a pass word that’s 14 characters or more it’s almost impossible for a hacker to crack it and less than 24 hours, meaning that it’s a great deterrent. If you want to go a little bit shorter you can use a 10 character password that contains a combination of numbers, symbols and upper as well as lower case letters. The best long passwords are completely random and the more random they are, the less likely that a hacker will be able to figure them out.

Rule 4: Don’t answer security questions completely accurately. While this seems a bit contrary, answering security questions on websites correctly is like giving a thief the keys to your house. Fact is, the answers to most of these questions can easily be found using Google, including the type of car you drive, your mother’s maiden name or the street you grew up on. Most of these  questions have a limited number of answers as well, like your favorite color or your favorite football team. If you are forced to answer these questions you may consider answering them all the same, but incorrectly, and of course make sure you remember what you wrote. Difficult? A little. Vital to protect your online accounts? Definitely.

Rule 5: Change your passwords regularly. Changing your passwords is like changing sneakers if you are an avid jogger; it’s necessary if you don’t want to blow out your Achilles tendon or have a hacker blowout your online accounts. A good idea is to change them every 3 months or so.

Rule 6: Use an online password manager. We realize that keeping track of complicated passwords is a bit of it chore. Today however there are password managers like Dashlane and Passpack (among others) that will protect all of your passwords and give you one master password only to remember. They will also auto-log you when you visit any of your sites so that you don’t have to go searching for your password or remember it every time you log on. It’s one of the best ways to make sure that you keep track of your passwords and not  get brain freeze.

And there you have them, A half dozen excellent tips that will help you to guard your online accounts and keep them safe from hackers, slackers and safe-crackers everywhere. I have passwords on sites ranging from my online banking down to my bingo account on http://bingo.paddypower.com/games, so security is absolutely vital. If this blog scared you a little that’s a good thing because most people don’t do anything unless they are motivated by a little fear. If we did scare you but it keeps you from losing a lot of money you’ll thank us later, so you’re welcome.

What kind of Debt is the Worst?

We all know that carrying any kind of debt isn’t exactly a “good” thing but is there actually a “worst” kind of debt to carry? Is credit card debt worse than student loan debt or mortgage debt? The fact is, even financial experts don’t agree on which debts are “good” and which ones are “bad” so, as a consumer, it can be rather confusing. To help with that confusion we put together a blog today that looks into what the worst kind of debt is and gives some advice from getting out from under it as well. Enjoy.

Debt: Student loans.

Why they might be the worst: Student loans are given to people with the least amount of credit experience (students, duh) as well as absolutely no idea about how to pay them back. Student loan balances are usually very high and, especially today, the jobs that students are relying on to be able to pay back these loans are sparse. Even worse, some students actually never graduate from college or university and thus have absolutely nothing that will help them to eventually increase their earning power. Also, student debt can’t be gotten rid of through bankruptcy like most other debts.

Why they might not be the worst: On average, college graduates still earn significantly more money during their working lifetime then people who don’t earn a degree. Student loans can thus be looked at as a type of investment whose payoff is the ability to earn more money in the future. If a student has some type of economic hardship they can also defer their payments (with interest, of course) and there are some loan forgiveness programs like the Income- Based Repayment Program.

Debt: Mortgage loans.

Why they might be the worst:  With nearly 9 million homes that either have negative equity or are very close, mortgage debt can be extremely bad. In the case of a homeowner with negative equity they actually owe more to the bank than what their house is worth. Selling it means either losing money or having a “short sale” that can damage their credit. The rising cost of taxes and insurance as well as maintenance add to the problem, as well as the fact that most mortgages take 30 years to pay off.

Why they might not be the worst: Holding onto a home (albeit for many years) is still one of the best ways for the average consumer to build wealth. If a person can keep up with their mortgage payments they will eventually pay off their home and it will then provide relatively inexpensive housing and the possibility of rental income as well. A reverse mortgage can allow them to use the equity that their house has built up and they can make a profit by selling it or pass it along to their heirs.

Debt: Credit Cards.

Why they might be the worst: Credit card debt usually carries an interest rate of 15% to 20%, some of the most expensive for any type of loan. When you take into account the low minimum monthly payments that some credit cards offer, a consumer can find themselves in debt literally for decades.

Why they might not be the worst: if a cardholder finds themselves in a financial crunch, having the option to make minimum payments on their credit cards, while not the best of solutions, can give them time to get back on their financial feet without damaging their credit. When compared to falling behind on a mortgage or automobile loan, credit card debt isn’t nearly as damaging and even though they will have to deal with collection agencies, that may not happen for months or years and will usually end up with some kind of settlement package that reduces the debt considerably.

Debt: Auto loans.

Why they might be the worst: On average today, and auto loan will last for 66 months or 5 and half years. Some auto loans actually get stretched out to 6 and even 7 years meaning that, long after they have lost their value (and that new car smell) the buyer is still making payments. By the time the auto loan ends the car or truck might not have any value left at all and could also have cost the owner hundreds or even thousands of dollars in maintenance and repair costs.

Why they might not be the worst: Cars are a modern necessity that people used to go to work and earn money and thus can be seen as a business expense. If a consumer budgets well, makes their car payment a priority and takes very good care of it (and if they aren’t surprised with unexpected repairs), they may be able to sell it or trade it in for a good price when they need to purchase a new one.  Today you can also refinance an automobile loan and lower the monthly payments, and automobile loans that are paid on time can actually help someone’s credit score too.

At the end of the day the worst type of debt is simply the one that you aren’t able to pay back on time. When this happens your balance will grow larger and your credit scores will take a big hit. You might even be forced to borrow more money just  so that you don’t fall behind on payments.

If you’re having trouble with debt of any kind and looking for financial advice or solutions, please let us know by sending us an email or leaving a comment and we’ll get back to you right away with answers that you can use.

Guard Your Retirement Income with these Comprehensive Tips

One sad fact that all people nearing or already in retirement have to deal with today is that income during retirement is lower than it’s ever been in  the last 60 years.  What does this mean for people who are nearing retirement? It means that saving as much as possible (in all areas of their financial picture) is vital as well as having a plan to achieve realistic rates of return on all of their investments once they retire.

A reasonable rate of return is between 3 and 6% and, depending on whether you’d like to use everything that you have during retirement or pass some of that money on to your heirs, the steps below will help you to plan accordingly. Enjoy.

  • Focus on eliminating debt before you retire. In many cases this means living below your means, paying down credit cards and other floating-rate debt and paying off your mortgage. Frankly, if you can give up a little in the last few years before you retire, you’ll be able to afford a lot more during retirement.
  • On debt that you can’t pay off, fix the rate. Mortgage rates for example, while they have risen a little bit lately, are still very low. In many cases it makes sense to actually raise your monthly payment if that’s what it takes to secure a fixed rate.
  • Use Life Insurance to insure your earnings.  This is especially vital if you already know that you’re going to need more money in order to be able to sustain the lifestyle that you want during retirement. Using life insurance to ensure those earnings during the last few years that you work is a great idea.
  • Assess your Insurance Coverage. What you want to do here is to make sure that you’re not over insured with your life insurance and under insured on long-term healthcare. Also look into “co-insurance”, an insurance policy that, for example, will pay 30% to 70% of future costs rather than 100%  but will more than likely be a lot less expensive.  This is a good option if you have enough savings to cover some healthcare costs should you need them.
  • Fully analyze all of your income  streams. Social Security, your pension, your income from any real estate as well as from investments, interest and savings plans  should all be analyzed so that you know exactly what you have and can better plan for what you will need.
  • Don’t forget to consider your taxes. Social Security and real estate have a number of tax ramifications but tapping principle from a tax account that has no realized capital will cost you nothing. IRAs and other types of retirement distribution are generally taxed as ordinary income. Knowing how and when all of these different income streams are taxed is vital.
  • Convert your assets to liquid assets. Even if you have a substantial net worth you may have income trouble if you don’t have enough liquidity, especially if interest rates begin to rise.
  • Don’t be too keen on chasing yield. Hi grade municipal bonds, AAA rated corporate bonds and other government-backed bonds in the bond market can be susceptible to major corrections. “Chasing their yields” can be a bad idea since they’re sensitive to interest rates and, as rates rise, their value will go down.
  • Don’t be afraid to spend your savings. If you’ve accumulated enough savings and you have other income streams that will continue to bring in money during retirement, spending that saved money moderately is not a bad idea.

Hopefully these tips have been valuable and you’ll be able to use some of them to keep more of your hard-earned money where it belongs, in your bank account. If you have questions about retirement, individual retirement accounts or financial questions in general, please let us know and will answer your questions, give you the advice you need and bring you solutions that can help.

Frugal Habits that may actually Cost You in the Long Run

Here’s a riddle for you; When is a money saving habit not a good habit? Answer: When it actually cost you more money than it saves you. All right, we admit that our riddle possibly wasn’t the most original or even fun riddle ever but it does apply to a lot of consumers. While most of us know that if you buy something cheap it’s probably going to break and need to be replaced quicker, there are some frugal habits that people have that actually aren’t all that frugal or all that good for your finances.

With that in mind we put together a little blog today that explores a number of frugal habits that people have that, for the most part, are not actually saving them money but costing them money. Read them, learn from them and, as always, enjoy.

Not writing a Last Will & Testament or trying to write one yourself.

While it’s true that it can easily cost $1000.00 to hire an attorney, even to draft a simple Will, and it’s also true that not writing out a Will won’t actually cost you a thing, if you don’t have one when you die your relatives could well end up getting substantially less of the money and assets that you leave them.

When you pass away without having a Will lawyers call this dying “intestate”. It also means that in order to take care of all of your money and financial needs and make sure that everyone gets what you left behind, they’re going to need to go to “probate court”. Now if the words “intestate” and “probate” make you think “expensive lawyers”, you’re exactly right.

Doing it yourself can be just as bad and frankly, jotting down a few notes on a MS Word file usually isn’t enough if you have a large family, a lot of money and lots of other assets. An excellent example is former Supreme Court Chief Justice Warren Burger. One of the most intelligent lawyers on the planet, Burger actually decided that he would write his own Last Will and Testament and, because of his folly, his relatives spent years, and hundreds of thousands of dollars, in court trying to get things straightened out.

Leasing a car instead of purchasing it.

Here’s the thing: there’s really not a whole lot wrong with leasing except for the fact that, with most leases, your mileage is limited to 10,000 to 12,000 miles a year. If you don’t go over that amount, leasing can be an excellent idea but, if for whatever reason your life or your job changes during the time that you have the lease, and you find that you are suddenly driving much more than the mileage allowed, you could well end up spending a huge amount of extra money on your lease.

If you look at the numbers closely, every extra hundred miles that you drive over the limit will cost you $10. When you consider that just driving around town once or twice a week will quickly eat up 100 miles, the extra amount you’ll be paying on your car’s lease may make you feel like you’re actually riding around in a taxi.

Avoiding the doctor when you’re sick and skipping annual physicals.

This “frugal habit”  is not only a money mistake but a health mistake as well. If, for example, you have a health problem that, because of the fact that you don’t go to the doctor for your yearly physical, goes unnoticed and untreated for several years, it might turn from “treatable” to “deadly” or from “acute” to “chronic”. This is especially true for eye exams and dental checkups.

Lest you think that skipping the dentist really isn’t all that bad, in the last decade there has actually been a huge rise in the number of emergency room visits for dental problems. When you consider that the average cost to have preventative checkups twice a year is approximately $700 and the average cost for an ER visit for a dental emergency is just under $6500, you see immediately that dental maintenance is much more palatable to your finances.

Putting away little or no money for retirement.

Lastly, and possibly most importantly, is the fact that less than 45% of Americans put away money for retirement on any sort of consistent basis, if at all. Taking advantage of tax-free contributions from your employer’s 401(k) or even a Roth IRA will net you literally thousands of dollars over a 30 or 40 year span and, if you’re not taking advantage of that, you’re leaving an immense amount of retirement income on the table.


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