Tips for Escaping the Consumer Debt Trap

Research has revealed that Americans collectively owe more than $1 trillion on credit cards alone – this doesn’t include other amounts owed on store cards and other forms of debt. If you’re unfortunate enough to be carrying a substantial amount of consumer debt, chances are that you’re thinking it will be impossible to become debt free. However, the following tips and advice will help you claw your way out of the consumer debt trap over time.

Determine how much you owe

Before attempting to repay all of your debts, it’s crucial that you know exactly how much money you owe on various store cards, credit cards or even outstanding medical bills. The easiest way to determine this will be to pull bank statements, credit card bills, store account statements and any other statements from institutions that you owe money to. 

Although it can be scary to see all of your bills facing you at one time, this will be the only way to see exactly how much debt you have.

Set Up a Repayment Plan

Once you’ve determined how much money you owe, you’ll need to set up a plan to ensure that everything will get repaid over time. 

Although the debt snowball method is usually recommended for repaying outstanding bills, it is not the only option. This method involves starting with the credit or store card that has the smallest amount owing on it and repaying as much as possible on the balance each month, while paying minimum require payment amounts on the rest of your debts. 

Another option you may want to consider is determining which credit or store account charges the highest interest rate and repay that specific one down as quickly as possible, while paying minimum amounts on the rest. Over time, this could save you a fair bit of money in interest charges – which can in turn be used to repay other debts quicker.

Inquire about Possible Balance Transfer Options

While it may seem counterintuitive to open another credit card, there may be cases where obtaining a balance transfer option to a 0% interest account could save you thousands of dollars in finance charges. Many credit card providers are so keen to attract new clients that it’s often possible to obtain a deal offering 0% interest for anywhere up to 24 or even 36 months in some cases.

Quit Using Credit Cards

The only way your credit and store cards will be fully repaid is if you commit to not taking on any new debts. It’s no use setting up a payment plan if you’re simply going to use your available balances again. Instead, save up and pay cash for large ticket items you want to purchase such as a new TV, replacement vehicle or that new couch you’ve been eyeing out. Your budget will thank you in the long run.

If you’re keen to create a better financial future for yourself and your family, but aren’t sure how to start doing so, contact us today. We will be more than happy to assist you with setting up a realistic budget and savings plan.

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retirement savings

Start Boosting those Retirement Savings Today

Rising living costs and increased job losses have made it more difficult than ever for individuals to start, add to or maintain decent retirement funds. Over time, this will result in them not being able to afford to live once they’ve stopped working. Below are a few ways in which you can get that retirement nest egg to start growing without it having a major effect on your current living standards.

Use Tax Refunds Wisely

Several individuals use tax refund money to purchase luxury items that they would otherwise not be able to afford. Instead of doing this, consider investing 50% of it before doing anything else. Large amounts of money are great to receive each year, but they can be made even more enjoyable when at least a portion is left to accumulate interest. 

For example, if you’re fortunate enough to earn $100,000 a year and you receive a $2,000 refund, investing just half of it would be the equivalent of increasing your existing 401(k) contributions by a full 1%.

Don’t Squander those Raises

Raises are generally seen as rewards for remaining loyal to your employer and proving your value as an employee. While it is tempting to increase your standard of living whenever you receive a raise, this won’t be too beneficial to you when the time comes to stop working. 

Instead of spending the full amount of the raises you receive, consider saving 50% of it instead. For instance, if your raise amounts to an extra $50 per week, save $25 of it and use the rest. Saving this amount will enable you to still enjoy the fruits of your labor, but you’ll also be securing your retirement at the same time. 

In most cases, the easiest way to save 50% of your raises will be to direct them to your 401(k) account because this will redirect the money automatically.

Consider Investing the Earnings from a Side Job

These days, thousands of Americans are working side jobs, either out of sheer necessity to make ends meet or to give their retirement funds a much-needed boost. Many of them have even been fortunate enough turn hobbies into paying gigs as well. If this is the case for you, why not consider using this to your advantage and save half of the earnings into a high-yield savings or retirement account?

While not everyone working second (or even third) jobs will be able to afford to save the earnings from these endeavors because of having to simply make ends meet, keep in mind that if you are able to save these funds, it will give your retirement nest egg a valuable boost. 

Your main goal should be to save as much money as realistically possible without having to do without the essentials, and the advice above will go a long way in helping you to boost your retirement fund. Saving half of any extra funds you receive will still allow you to enjoy some of the extra cash – but you’ll also enjoy peace of mind in knowing that you’re securing your financial future at the same time.

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Is it Possible for Singles to Build Savings?

A number of singles in their 20s and 30s tend to focus so much on establishing their careers that they forget completely about planning for retirement. However, the truth is that the sooner you start planning for this time of your life, the fewer financial worries you’ll have when reaching your 50s and 60s. Here are a few ways in which singles can build a decent retirement nest egg fund.

Consider an Additional Job

If the current cost of living is making it difficult for you to maximize your tax-deferred savings accounts or even build a healthy emergency fund, you may have to consider taking on a second job – even as a temporary option. This can provide you with a much-needed financial lifeline, especially if you’re struggling to repay consumer debts as well. After all, you definitely don’t want to be stressing about trying to repay any debt when the time comes to retire.

Save as Much as Realistically Possible

If you’re single, it’s strongly recommended that you save as much as permitted in any tax-deferred forms of savings account you may have each year. This may seem impossible initially, but keep in mind that you may not have financial support from a spouse or partner to help pay bills and other daily expenses. 

Now is also the time for you to start building a reasonably sized emergency fund, which should be anything from three to six months worth of expenses – again, you won’t be able to rely on the security of a partner’s income if you happen to become disabled or injured and not be able to work for an extended period of time. 

Give yourself Financial Protection

Single people tend to be at a higher risk of experiencing financial disaster if they become unable to work for any length of time due to job loss, injury, or disability. For instance, if you’re in your 40s and suddenly unable to work for any reason, it’s crucial that you have a financial plan in place that will help you cover living expenses until such time as you die. The best option, in this case, I some form of disability protection. 

When you purchase any form of disability protection, you must check the policy thoroughly to ensure that payouts will be able to cover you for as long as it will be needed. Keep in mind that many cheap policies will normally only payout for a predetermined period of time, so it’s strongly recommended that you enlist the help of a financial advisor before signing on the dotted line. 

Ensuring that your retirement will be as financially stress-free as possible need not make you feel overwhelmed, especially if you take the advice mentioned above into consideration and act upon it as soon as possible. If you would like to ensure that you’ll be able to enjoy your golden years as much as possible without worrying about money, contact our team today to schedule an appointment.

 

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early-retirement

Can Early Retirement Add More Years to Your Life?

Your retirement years are supposed to be the time of your life where you get to enjoy yourself after working for many years. It’s that time when you’ve had a successful career, repaid your student loans and hopefully eliminated all of your other consumer debts as well. Being able to retire early is something many individuals dream about being able to do, and studies have shown that stopping work at a younger age could be the ticket to living longer as well.

Study Results

A study was performed in 2017 in the Netherlands and the results thereof were published in the Health Economics journal. It indicated that men who were able to retire before age 60 were up to 3% less likely to die within the first five years after stopping work than men who only retired after 60 or 65. No conclusive evidence was provided with regards to how early retirement affected women, unfortunately. 

Another study undertaken at the University of Wisconsin revealed that retired individuals got to enjoy more leisure time, which in turn helped several of them to adopt healthy habits such as exercising more, quitting smoking and altering their diet patterns – all of which led to them being able to live longer. This particular study involved men and women and it clearly indicated that early retirement could significantly impact a person’s wellbeing. 

A Potentially Conflicting Study

Despite all of the evidence from the above-mentioned studies, an alternative study that had its results published in the Journal of Epidemiology and Community Health revealed opposing information. Researchers involved in this study made mention that individuals who worked for a year more than their peers were up to 11% less likely to die at an earlier age. However, the study size was particularly small and focused almost entirely on men.

A study that was similar to that undertaken at Wisconsin University noted that retirement could in fact have a negative effect on the health and longevity of men. It stated that retired men stood up to a 12% chance of becoming obese within just four years of retiring early – which would in turn cause several other health issues to develop. 

Keeping Active

If it’s one thing the studies all revealed, it’s that it is extremely important for anyone who retires to find some type of purpose. While some individuals will find it absolutely thrilling to embark on a new life, others will feel empty or lost and think they no longer have anything to offer anyone. 

Hobbies and other outside interests are crucial, as is a decent retirement nest egg – these will help prevent the onset of stress and depression that is usually associated with worrying about finances. It’s also important to remember that everyone’s retirement paths are different, so never compare yours to anyone else’s. 

Although it’s fairly inconclusive whether retiring early will help you live longer or not, the fact remains that you need to do everything possible to make this time of your life pleasant and enjoyable. If you would like to ensure that your nest egg will be large enough to see you through retirement, contact us today.

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