debt free

How Being Debt Free will Benefit your Financial Future

Up to 75% of American families are carrying some form of consumer debt these days, making it fairly easy to think that this way of living is quite normal. While many households simply shrug off the fact that they owe money on multiple credit and/or store cards, the truth is that this behavior does have an effect on stress levels. 

Although it is possible for several families to adopt a debt-free lifestyle, it does require a high degree of self-control and financial discipline. Below are some ways in which living a debt-free life will benefit your finances now and in the future.

Less Stress

Knowing that you owe money on one or more store or credit cards and a vehicle causes untold amounts of anxiety in most people, which in turn can negatively affect your health over time. If you’re suddenly unable to make a payment on your vehicle, you stand a strong chance of losing it – along with all the money you’ve already paid towards its loan. 

Eliminating just your credit card debt and vehicle loans will go a long way in helping you to feel a tremendous sense of relief in knowing that your car cannot be repossessed due to non-payment, for instance.

Enjoy Increased Savings

Living debt-free not only relieves stress levels; it makes it easier for your household to save money as well. Money that would have initially been spent on credit or store card interest can be placed in a savings account instead, which can be used to build a decently sized emergency fund over time. If you already have an emergency fund, additional savings can be put towards other activities such as a vacation – or even starting to fund your retirement.

Have Funds to Invest

One of the biggest advantages of being debt free is that it will provide you with the ability to start investing money for your future. 

The earlier you can start investing towards your future, the more time compounding interest will have to help your money grow exponentially over time. This could even enable you to consider the option of early retirement in some cases.

Enjoy Financial Security

A lifestyle that’s free of consumer debt will go a long way in helping to increase your level of overall financial security. It means that you won’t have to constantly worry about debt hanging over you if you or your spouse unexpectedly loses a job or have work hours cut. If the worst happens and you become ill, having backup finances available will allow you to focus on recovery instead of finances as well. 

If you’re struggling to make ends meet because of having a lot of consumer debt, or you’d like to find out more about how you can manage your finances in such a way that you’d be able to save towards retirement, get in touch with our team today. We look forward to helping you create the most secure financial future possible. 

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christmas gifts

Don’t Bust your Budget this Christmas

Although Christmas gift giving has been the norm for many years, this activity can drain your finances far quicker than you realize – especially when family and friends have come to expect certain standards in this regard. 

If you’d still like to ensure that your family and friends get to enjoy this time of year as much as possible without having to worry about how long it will take you to pay off those gifts, the tips below will help you get started.

Set your Budget

Festive season spending can go overboard very quickly if you fail to formulate your shopping list according to your budget. Before committing to purchasing any gifts, food, decorations or other Christmas supplies, determine the amount that you’ll genuinely be able to afford to spend on these items. Once you’ve done this, you can sit down and start making a list of gifts and other supplies that need to be purchased.

Track your Spending

Many individuals spend wildly throughout December, thinking that they’ll be able to deal with the aftermath in January. However, your finances will be far better off if you track your expenses as you make purchases because it will prevent you from overspending or having to put Christmas gift purchases on your credit card.

Prioritize Gift Giving

Although you may be used to purchasing gifts for several family members and friends, you may need to prioritize whom to buy for if you intend sticking to a budget. Consider focusing on the people you spend the most physical time with – don’t feel obligated to purchase costly gifts for relatives you seldom see. Chances are that they may also be feeling the financial pinch and will be relieved to not have to reciprocate.

Shop Around

These days, consumers are beyond spoiled for choice when it comes to doing Christmas shopping in-store and online. As such, taking a little extra time to shop around instead of grabbing the first offer you come across could enable you to save a lot of money on gifts. 

Many stores offer discount codes when spending over a specified amount or if you’re purchasing specific items. Before clicking on that ‘place order’ button, be sure to spend a few minutes searching online and on the store’s website to see if you can shave a few dollars off your order cost.

Ditch the Random Gift Exchanges

When questioned, most individuals state that they absolutely dread having to take part in any form of random gift exchanges, such as those that are often hosted at workplaces or social clubs that they may belong to – Christmas tends to be costly enough without having to deal with the added stress of purchasing a gift for someone you hardly know as well. If asked to participate, simply mention that your budget has been allocated elsewhere for this year. 

The saying of, “It’s the thought that counts,” certainly applies to gift giving this time of the year. If you simply cannot afford to purchase multiple gifts, most family members and genuine friends will still appreciate the time that you’ll be able to spend with them during the Christmas season.

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Disadvantages of Continuing to Work After Retirement

More individuals than ever are choosing to delay their retirement and continue working after turning 65 and current statistics have revealed that up to 20% of men and women over this age are either still actively employed or seeking a position. 

While there are advantages to remaining employed during this time of your life, there are also a number of disadvantages that must be taken into consideration.

Working after Retirement can Affect Social Security Benefits

First and foremost, it’s crucial to keep in mind that working after turning 65 will usually have a negative effect on your Social Security and Medicare benefits. For instance, both of these benefits can be affected by the amount of income you earn after you’ve officially retired. 

If you’re receiving Social Security payments during 2021, you haven’t yet reached full retirement age and income from your post-retirement job exceeds $18,960, your benefit will be reduced by $1 for every $2 earned over this limit. However, once you officially reach full retirement age, you’ll be able to work without having your Social Security benefits reduced.

It’s Not a Guaranteed Solution for a Shortfall in Savings

Although continuing to work after officially retiring – even part-time – provides a good way to supplement any personal savings you may have, keep in mind that you won’t always be able to control your employment situation. For instance, if you become ill or are injured, you may have to stop working completely – regardless of whether you can afford to or not. As such, it’s crucial to prioritize retirement savings while you’re still young and healthy.

You’ll Have Less Time to do the Things you Enjoy

The most obvious disadvantage of continuing to work after turning 65 is that you will be left with less time than ever to do the things you enjoy – which is usually the main objective of retiring. However, this may not always be a serious issue if you happen to find a position that you enjoy.

You Could Experience Additional Stress

As most individuals become older, they look for ways to reduce the amount of stress in their lives – and going back to work will certainly not be the way to do this. This will be the time to consider the real reason why you’re returning to work – are you bored sitting at home day after day or do you truly need the extra money to cover unexpected medical bills? If you don’t really need to extra money, it may not be worthwhile to subject yourself to the unnecessary stress of going back to work. 

Although many new retirees feel compelled to remain as active as possible, it’s important to remember that this is the time of your life when you should seriously consider slowing down a little to enjoy your golden years as much as possible. If you truly are bored being at home day after day, consider donating some of your free time to a charity or other worthy cause that you feel strongly about. 

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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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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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Why so Many Individuals Cannot Afford to Retire

Several individuals look forward to the day when they’ll no longer have to wake up to an alarm clock and spend eight hours a day stuck inside an office. However, this idea is little more than a dream for a number of older individuals who have fallen short of being able to save the money they need to retire. Below are some of the reasons why so many older individuals aren’t able to afford to retire.

Seniors are Hoping to Work for Longer

A number of older individuals haven’t saved money for retirement because they had hoped to continue working throughout this time of their lives – either full-time or in a part-time capacity. However, these intentions often don’t go according to plan, with more than 50% of individuals being forced into retirement sooner than they’d hoped because of health or employer-related issues. 

One Third of Seniors Have No Savings

Up to a third of Americans have not set aside any savings for retirement, and the majority of those who have been saving are still far behind where they should be. Several reasons were provided for this deficit such as:

  • Prioritizing repaying student loans or starting college savings accounts for children
  • Having too much consumer debt that prevents money from being saved
  • Planning to rather save larger amounts of money at a later stage in life instead
  • A general lack of desire to start saving

Reduced Focus on Saving

Most financial experts strongly recommend having a minimum of 70% of your annual income saved before retiring. However, research has revealed that the amount of individuals who are actively saving money has declined rapidly over the past 30 years – to the point where up to 50% of Americans cannot come up with $500 to cover the cost of an unplanned emergency. One of the main reasons why people are saving less nowadays is that many of them have experienced income reductions that prevent them from being able to even cover the bare necessities. 

Higher Cost of Living

Even people who were under the impression that they were setting enough money aside for retirement could find themselves falling short because of continually rising living costs. Economists have warned that seniors throughout the country don’t have enough money saved to sustain their current lifestyle. Residents of Hawaii, Alaska and South Carolina seem to be faring better than seniors in other states such as New Jersey, North Dakota, Minnesota and Massachusetts. 

There are a number of reasons why individuals who are close to retirement age or are in the process of retiring don’t have sufficient savings to carry them through this time of their lives. In many instances, simply recognizing the reasons why they haven’t got enough saved is the first and most crucial step towards sitting down and compiling a plan that will at least help them to have a little extra cash set aside for when they’re no longer able to work.

If you have fallen behind with retirement savings or you’re unsure how to go about starting to save for this crucial time of your life, contact us today. 

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couple at a market

Why a Detailed Budget is Crucial for Financial Success

Many individuals think that if they can simply earn more money, they will automatically be better off financially. However, many households that are earning six-figure incomes have found that they are still struggling to make ends meet because they haven’t taken the time to compile a budget that would allow them to see where their hard-earned money is really going. 

If you’d like to ensure that your finances work for you over time, now is the time to compile a detailed budget.

Help Control Spending

When you use money without having a budget in place, there’s nothing to stop you overspending. Although you may have a basic idea of how much you’re spending each month, it’s too easy to overspend without having accurate figures on hand. 

When you and your spouse sit down and compile a list of where all of your money has been spent, you’ll quickly be able to see which categories of your budget are prone to overspending. For instance, you may find that your daily takeout lunch habit is setting you back to the tune of a few hundred dollars a month.

Achieve Financial Goals

Regardless of whether your goals involve having a good-sized emergency funs, paying for your child’s college fees or enjoying a dream vacation, having a detailed budget will help ensure that you’re able to allocate funds to the life events that matter most to you. For instance, knowing that you have an emergency fund will reduce stress levels in the event that anything goes wrong because you won’t have to worry about how you’ll be covering an unexpected expense.

Avoid Debt and Improve Credit History

Your budget will help you identify areas where overspending is taking place, which will in turn help you avoid racking up unnecessary consumer debt. If you have already accumulated high levels of debt, a budget will help you identify areas where spending cutbacks can take place and the savings incurred from them can then be put towards repaying your creditors. 

Compiling your Budget

When compiling your budget, you’ll need copies of bank statements as a starting point. These will allow you to see exactly where each dollar has been spent in previous months, making it easier to determine where spending reductions can be made. For instance, your bank statement will show how many times you purchased takeout in a specific month or how many subscriptions you’re paying for.

Once you have your bank statements on hand, carefully check to see which expenses are being deducted from your account – in some cases, a subscription you canceled a while back may still be getting charged to your account. If your expenses exceed your income, spending will have to be reduced – many households can trim expenses by purchasing cheaper grocery items, canceling unused memberships and only purchasing clothing when absolutely necessary. 

If you’re struggling to compile a workable budget or you’d like to obtain financial advice from experienced professionals, contact us to set up an appointment today. We look forward to assisting you.

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retirement planning

What is the Right Time to Start Retirement Planning?

A commonly asked question when it comes to retirement is, “When is the right time for me to start planning for my retirement?” If you’ve only recently started climbing the career ladder, you may be thinking that you’ll still have a lot of time before you need to start preparing. However, if it’s one thing financial experts agree on, retirement planning should always start sooner rather than later.

Your 20s 

The concept of saving for retirement can seem virtually impossible when you’re still in your 20s because you may have just recently started a career and not be earning a decent wage yet – or you may still be struggling to repay student loan debt and think you don’t have enough cash left over to still invest for retirement. Alternatively, you may have other goals at this time of your life, such as starting a family – causing you to push retirement planning further away than you should. 

Below are just a few benefits you’d be able to enjoy if you start saving towards retirement in your 20s:

Take Advantage of Compounding Interest

Every year, your money will earn interest in two ways – on the money you’ve saved and on any interest earnings that you received in previous years. This means that the earlier you start saving, longer you’ll be able to take advantage of two forms of interest being earned towards retirement.

Enjoy Tax Savings

By placing your retirement funds into an IRA or Roth account, you’ll be able to take advantage of tax deduction of up to $5,500 for each year that you make these contributions.

You won’t have to Catch Up on Contributions at a Later Stage

Individuals who don’t make any contributions towards retirement savings during their 20s and 30s usually only realize how far behind they’ve fallen when they reach their 40s or 50s. By the time this happens, they will have to contribute a far higher portion of their earnings each month to ensure that they’ll actually have enough to live on when they’re no longer working.

Develop Healthy Savings Habits

If you make it a priority as early on as possible to start saving for retirement – and any other emergencies that may arise from time to time – you’ll develop good spending habits that will help prevent you from needing to borrow money if times get difficult. 

The Case for Starting to Save Later in Life

If you’ve waited until your late 40s or even 50s to start thinking about saving for retirement, you may be thinking that it’s too late to do anything about it. However, there are several reasons to get started, even if you intend to retire in the next five to 10 years. 

  • Most individuals reach their highest earning potential at this time of their lives
  • Several employer 401 (k) plans allow employees over 50 to contribute more money than younger employees

In short, it’s never too late to start saving towards retirement. If you would like to find out how to get started, contact us today to schedule an appointment with one of our financial advisors. 

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