keeping busy retirement

Why it’s Crucial to Keep Busy after Retiring

The idea of no longer having to wake up to an alarm every weekday morning and being able to choose how they want to occupy their days is an idea that’s highly appealing to most working people – especially after having spent 40 or more years in the workforce. 

However, many of these individuals suddenly find themselves at a loose end because of not knowing what to do with all the free time they now have – which can result in them experiencing severe bouts of depression.

Below are some reasons why you should keep as busy as possible after retiring:

Ease the Boredom

Although most people literally count down the years until they’ll be able to retire, many of them end up being caught off-guard when they are left with endless amounts of free time. Many jobs also provide a level of mental stimulation, which also comes to a sudden stop they day that the office job comes to an end. 

While some people will take on new hobbies or interests after retiring, others may find that this alone doesn’t provide the mental stimulation they need. As such, taking on a part-time job could be highly beneficial for them – not just to alleviate boredom, but also to supplement income.

Keep up with Social Engagement

If you’re a person who doesn’t enjoy being aloe, chances are that you’ll miss the daily bustle and routine at your workplace after retiring. 

Many older individuals have worked with the same colleagues for a number of years, meaning that many of them will have become friends during this time. Opting to continue working part-time will help ensure that these relationships can continue to thrive. In cases where your part-time position is at a different company to that where you worked previously, it will provide an opportunity to make new connections and friends.

Keep those Cognitive Skills Sharp

Getting involved in various activities after retiring will not only help ensure that you have a good amount of company during this time of your life; research has shown that individuals who continually interact with others will possess cognitive skills that are far better than those who decide to isolate. Although poor cognitive skills will not render an individual incapable, they do make it more difficult for a person to successfully interact with others.

Supplement Income

Many retirees discover too late that the funds they had set aside for this time of their lives will not be sufficient for them to make ends meet. Taking on a part-time position can help supplement existing retirement income to the point where you may even have a little cash left over at the end of the month to treat yourself after covering essential expenses. 

Although the thought of literally being able to sit and do nothing all day seems highly appealing – especially to individuals who have had fast-paced careers, the truth is that most people won’t be happy doing this for long. If you would like to learn more about building a sizeable retirement fund, contact us today. 

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credit-score

Just How Important is your Credit Score?

In general, society has become increasingly dependent on the use of credit to make purchases and provide information to various lending institutions regarding financial decisions that need to be made. These days, a good credit score is needed for far more than just obtaining a credit card – it also demonstrates your history of repaying debts to any entities that you’ve borrowed money from. 

Here are some reasons why it’s crucial to maintain the highest possible credit score:

It will affect where you Live

Before you’ll be able to obtain a mortgage, lends will want confirmation that you’ll be able to repay them. If your credit score is low, many lenders will decline a loan application because you’ll be considered as a high risk for defaulting on payments. 

If you’re approved for a mortgage, your credit score will affect the interest rate on it as well – the higher your score, the lower your interest rate will be. Landlords now also take a person’s credit score into account to determine whether you’ll be a suitable tenant or not.

It will affect the Car you Drive

Most individuals simply don’t have the financial means to cover the cost of buying a vehicle outright and still paying rent or mortgage installments, meaning that they’ll apply for an auto loan at some point. Your credit score will affect whether you’ll qualify for an auto loan, the amount you are eligible to borrow and the interest rate you’ll pay on installments. 

A low credit score will not only make it more difficult to obtain an auto loan; being charged a higher interest rate on your loan also means that it will cost you far more to repay over time.

It Affects Living Expenses

Believe it or not, a good credit score will also be required when the time comes to establish utility services in your home. Electric companies for instance will state that you’re effectively borrowing your first month of electricity, so they will check your credit score to determine whether you’re a low or high risk customer. The same principle will often also apply to phone, water, internet and cell service providers nowadays. 

Tips to Manage your Credit Score

  1. Pay on Time

Your payment record has a major influence on your credit score – even paying one credit card installment a few days late will pull your score down. 

  1. Reduce the Amount you owe

Use your credit report to see how much debt you have and arrange them from smallest to largest amounts, or alternatively, according to interest rates that are being charged on them. Work through your list by paying off those with the smallest balances or highest interest rates first. 

Ensuring that you keep your credit score as high as possible will help ensure that you’ll be able to obtain the best possible interest rates if the need ever arises to apply for a mortgage or auto loan, or move into a better neighborhood. 

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retiring early

To FIRE or Not to FIRE? That is the Question

Over the past few years, more and more individuals have entertained the idea of retiring at younger ages than ever before – resulting in the start of the FIRE (Financial Independence, Retire Early) movement. This concept has become especially attractive among high-earning individuals in their 20s, 30s and 40s and it involves living frugally and saving as much as possible during the early years.

Advantages of FIRE

Don’t be Stuck in a Job you Dislike

The main appealing factor of FIRE is the freedom you’ll have in that you get to choose how to spend your time. If you don’t have to go to work each day, you can generally do whatever you like. In fact, many FIRE retirees live in a state of almost-permanent vacation by traveling, playing their favorite sports and doing exactly as they please while they’re still young enough to be able to enjoy activities like these to the fullest.

You’re Saving more than You’re Spending

Although there aren’t many hard and fast rules regarding good financial planning, the aspect of saving more than you’re spending certainly is one of them. 

This rule is the main cornerstone of FIRE as well in that the path to achieving it involves highly disciplined spending and saving habits. Many FIRE retirees are known for saving as much as 50% of their disposable income, with some even saving 70% to 75%. Many of these individuals invest in index funds and/or purchase properties that will provide them with passive income after they’ve stopped working. 

Disadvantages of FIRE

Extreme Frugality isn’t for Everyone

Saving 50% or more of your income can become extremely restrictive on your budget, especially if you’re paying for a mortgage or have kids in college. Many individuals who tried the FIRE strategy have admitted to feeling miserable because of having such limited funds available to spend. 

Before taking the leap into the FIRE lifestyle, keep in mind that the extreme frugality that’s usually required to make it work can become mentally and physically exhausting.

It can become Lonely

Although you may be able to FIRE and think that you’ll be able to enjoy spending more time with friends, this may not always be the case – because most of them will still be working at their jobs. As such, you’ll still have to wait until they can get time off so that they can join you for vacations or other fun activities.

Tax Structures may Change over Time

A number of individuals plan their FIRE strategy around the fact that they will be able to rely on potential Social Security payouts and Medicare to help cover medical expenses at a later stage of their lives. However, it’s crucial to keep in mind that Social Security may not be available forever and Medicare costs could rise to higher levels than initially imagined – putting a huge damper on potential FIRE plans.

Although joining the FIRE movement can be tempting, you’ll need to ensure that the funds you’ve set aside will be able to carry you through several decades. Contact us today if you’d like to learn more about setting up a good retirement investment portfolio.

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financial mistakes

Avoid Making These Financial Mistakes

Managing and controlling your personal finances is no easy task because it involves careful planning, experience and continual learning to reach the point where you finally feel at ease about the direction your financial future is taking. As such, it’s inevitable that you’ll make at least one or two money-related mistakes along the way. 

Below are some common financial mistakes that can be avoided:

Excessive Spending

It has been said that great fortunes are often lost one dollar at a time. It might not seem like a big deal when you splurge on eating out or buying that coffee every morning, but in reality, every penny you spend will add up over time. 

Spending $30 on that restaurant meal once a week will cost almost $1,600 per year, an amount that could make a sizeable dent in an auto loan or mortgage balance over time. Although you may feel that you deserve this weekly splurge, you should only give in to it if you know that it won’t affect your long-term financial goals.

Not Having an Emergency Fund

More than half of working Americans have admitted that they would have to pay for a $400 emergency by using a credit card because they have no savings set aside. This behavior will not only cause debt to accumulate quicker than you realize; over time, that $400 emergency could end up costing you double that amount because of accumulated interest and finance charges. 

It’s recommended to have an emergency fund that can cover a minimum of three months of regular expenses – this will become a literal financial lifesaver over time.

Making Minimum Payments on Credit Cards

Although many individuals think credit cards are helpful and provide them with reward points, the hard truth is that they become dangerous where financial responsibilities are concerned – especially when you only make the minimum required payments on outstanding amounts each month. 

If you have to use a credit card for any reason, ensure that either the full amount is repaid as quickly as possible or that you repay a fair bit more than the minimum required payment. This will reduce the amount of interest that is being charged over time.

Failing to Save for Retirement

Several Americans delay starting retirement funds because they think ‘there’s still lots of time to do this.’ However, this time of your life will arrive before you even realize it.

Starting a retirement fund in your 20s or 30s will not only mean that you’ll need to set aside smaller amounts each month; the power of compounding interest over a few decades will help ensure that your money grows by a sizeable amount – giving you enough to retire on when the time comes. 

It can seem overwhelming to try and compile a budget, establish an emergency fund and save for retirement at the same time. However, taking one step at a time will help you achieve these goals and provide you with the peace of mind you deserve where your financial future is concerned. 

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