retirement

Why Debt and Retirement are Not Compatible

Retiring with any form of debt is considered to be extremely risky because it not only adds a level of stress that you definitely don’t need during this time of your life; it will reduce the amount of money you’ll have to live on each month as well – and Social Security will almost certainly not be enough to bridge the shortfall in your finances. 

Below are just some of the reasons why you should do everything possible to enter retirement debt-free.

Interest Payments could be Used to Fund Living Expenses

The last thing you need to deal with during your golden years is having to throw money away in the form of interest payments and finance charges – which is what you’d be doing if you’re still carrying consumer debt by the time you stop working. 

It’s strongly recommended to pay all consumer debts – and preferably mortgages as well – in full by the time you reach your late 40s or early 50s at the latest. This will give you enough time to start putting additional funds away that will come in handy once you’ve stopped working.

Your Income could be Severely Limited

Many seniors are disappointed to find that they will have to live on a fraction of the funds they were used to enjoying while they were employed – which will only be more difficult to do if you’re still trying to pay off debt when you retire.

Eliminating consumer, mortgage and student loan debt before retirement will help provide you with just that little bit extra to get by with each month – which will be crucial if you haven’t been able to save a lot of money for this period of your life.

This is Not the Time of your Life to Stress over Finances

Your golden years are not the time to be stressing over how you’ll make the mortgage payment or repay that car loan you took out while you were still working. Retiring debt-free will not only provide you with an increased sense of financial security; dealing with less financial stress will allow you to focus your time and efforts on the more pleasurable activities such as traveling, engaging in a new hobby or even enjoying a few extra meals out every so often.

Get your Budget and Investments Sorted before Retirement

Before you can even think about retiring, it’s essential that you’ve inspected your budget and investment or savings portfolio to ensure that you’ll have enough money to live on once you’re no longer employed. Setting up an appointment with an accredited financial advisor will help you determine where you are on your financial journey and whether any adjustments will need to be made with regards to your savings and investment plans. 

If you would like to obtain additional information about ensuring that your retirement years will be as financially stress-free as possible, contact our advisors to schedule an appointment with one of them today. We look forward to helping you plan the best retirement possible.

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staying-active

Too Much Free Time After Retiring? Give these Boredom Busters a Try

Most individuals worry about the financial stresses associated with retirement such as covering the cost of healthcare, dealing with unexpected expenses such as home or car repairs or even paying property taxes. However, emotional and mental issues can quickly become all consuming during this time of a person’s life as well. 

Many seniors find themselves becoming restless and bored within just a few months after retiring, meaning that up to 40% of them end up experiencing bouts of depression. This can be alleviated though, by engaging in some of the following activities.

Learn Something New

Retirement can provide you with the perfect opportunity to expand your intellectual horizons. If you have a few hours to fill in the day, consider visiting your community college to see what classes are on offer for older residents. You could find yourself learning about botany, ancient history or virtually any other subject that interests you. Alternatively, some museums also offer free educational programs.

Start a New Hobby

Starting a new hobby need not cost a lot of money. In fact, activities such as baking, painting, cooking, fostering pets for your local animal shelter or even learning a new language can be enjoyed extremely affordably, and you’ll often be able to find classes to learn more about your new found interest before delving in completely.

Consider becoming a Volunteer

If you don’t have a need to work part-time during retirement to keep busy, volunteering for a cause that you strongly believe in can help keep you active – even for one or two days a week. In most cases, all you’ll need to do to volunteer is approach the organization you’d like to work with and let them know of your intentions. Most charitable organizations will welcome any assistance they can get.

Stay Active

Just because you’re no longer working full-time, it doesn’t mean that you should go home and assume the position of a couch potato – a lack of exercise during your golden years has been shown to encourage the development of many mental and physical ailments.

It’s recommended that you get some exercise at least three times a week for approximately 30 minutes at a time. Even a gentle stroll around your neighborhood will go a long way in helping to alleviate boredom and keep that brain matter active.

Keep those Social Connections Active

Although many retirees lose touch with several of their social connections after they stop working, this need not be the case. Ensure that you keep in contact with family and existing friends as much as possible – it also wouldn’t hurt to make a few new friends along the way during this time. 

Your retirement years can be extremely gratifying if you have planned for it correctly ahead of time. Ensuring that you find ways to beat the boredom blues as much as possible will help you enjoy what should be the most relaxing time of your life. 

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consumer-debt-trap

Crawling Out of the Consumer Debt Trap

The average American currently carries between $10,000 and $15,000 in consumer debt, and this includes credit cards, store cards, auto loans, personal loans and any other amounts owing that don’t include mortgage payments. If only the minimum required payment is made on debt of this amount, it would take a whopping 13.5 years to repay it in full – and this is if no additional debt is accrued during this time.

Regardless of the type of debt you’re carrying, there are steps you can take that will help you get out of the consumer debt trap once and for all.

Pay More than Minimum Required Installments

One of the best ways to eliminate consumer debt as quickly as possible is to pay more than the required minimum balances on any outstanding amounts. This will not only reduce the amount of time you’ll need to pay a bill in full; you will also save a significant amount of interest while repaying your debt.

Consider Using the Debt Snowball Method

This process involves paying as much as you can on your smallest consumer debt, while ensuring that minimum repayments are still being met on the others that still need to be repaid. 

Start by listing all of the consumer debts you’re currently carrying, from the smallest amount owing up to the largest. Do everything you can to pay as much as possible off on your smallest debt each month. Once the smallest debt has been fully repaid, take the amount you were paying towards it and include it on the minimum amount you were paying on the next smallest outstanding debt. 

An alternative approach here can be to get the debts with the highest interest rates paid first – this will help save a lot of money over the long term.

Stick to a Tight Budget

After deciding that you want to eliminate your consumer debt, you’ll need to examine your budget carefully – if you don’t have a budget outlined, now is the time to address this issue. 

Start by collecting bank account statements and carefully check each line item – this will allow you to see how your hard-earned cash is being spent each month. While those drive-through coffees and $10 lunches may not seem like a lot of money, they quickly add up, especially if it becomes a regular habit to indulge in them. 

Subscriptions to the fastest internet packages (slower options usually get the job done just as effectively but for a fraction of the price), online streaming, club memberships, monthly box deliveries and any other recurring expenses that aren’t genuine essentials should be eliminated from your budget until your debt is fully repaid. 

Once your debts have been paid in full, you’ll be able to re-examine your budget to determine how much money can be set aside for discretionary expenses. 

Although you may think that you’ll be depriving your family of the ‘nice to haves’ while you’re dealing with your outstanding consumer debt, the truth is that your whole family will enjoy far greater peace of mind in knowing that you’ll now be able to start saving for a rainy day instead of stressing about trying to make ends meet each month. 

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credit-cards-retirement

Are you Really Benefiting from those Credit Cards?

These days, a number of rewards-based credit cards are available to consumers and incentives such as air miles, discounts on store-specific purchases have never been easier to obtain – or so it seems. While many of these cards may seem to provide extremely attractive incentive options, it’s crucial to read the fine print associated with each of them before signing up.

Those Rewards Likely come with High Fees and Interest Rates

Accumulating rewards may seem awesome initially, but you’re totally defeating the object if your card comes with fees that actually outweigh the benefits you think you’re getting. 

In most cases, the average reward redemption value on these credit cards is around 1% of what you’ve paid to earn it. This means that if your interest rate is higher than 1% on the card, then the credit card company is the one who is really benefiting from this arrangement – and not the cardholder. 

Another thing to keep a close watch on is any annual fee that may be charged – these can often be quite exorbitant on rewards credit cards.

You’ll be Encouraged to Spend More

Basic human psychology suggests that when someone is offered anything that seems like a good deal, most people will be tempted to purchase it – even if they don’t need it. As such, companies that offer reward credit cards take full advantage of this type of thinking.

Before putting any purchase on your reward credit card, do the math to see how much you’ll really need to spend before you’ll qualify for any decent type of incentive. For example, it’s not worth spending an extra $1,000 on credit just to get a reward of $10.

Rewards may come with Limitations

That long list of potential rewards that can be earned with your credit card may seem tempting, but it’s crucial to read and understand all of the terms and conditions associated with using these cards. For example:

  • Rewards may expire – some credit cards rewards may expire after a predetermined period of time, so ensure that you’ll be able to redeem them before this happens
  • Rewards may be limited – some credit cards reward programs limit the amount of incentives that can be earned in a quarter or during a year, so you may not end up getting as much of an incentive as you’d initially thought
  • Beware of redemption thresholds – Unless your credit card offers cash-back rewards, you’ll have to convert accumulated reward points into something useful such as a gift card or even airline ticket. However, keep in mind that many reward programs require a minimum number of points to be accumulated before you’ll be allowed to redeem them for a reward – and this could mean that you’ll have to spend thousands of dollars before being able to take advantage of rewards you’ve earned

In most cases, consumers will benefit from using standard credit cards that charge lower interest rates and don’t charge annual fees of any sort instead of signing up for rewards-based options. Always ensure that all fine print is fully understood before signing up for any type of credit card – whether it’s reward-based or not. 

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